Determining values - convertible bond Craig's Cake Company has an outstanding issue of 20-year convertible bonds with a $1,000 par value. These bonds are convertible into 60 shares of common stock. They have a 13% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 16%.

a. Calculate the straight bond value of this bond. (ANSWER: $822.13)

b. Calculate the conversion (or stock) value of the bond when the market price is $11 per share of common stock.

c. What is the minimum market value of the bond?