Determining valuesConvertible bondCraig's Cake Company has an outstanding issue of 20-year convertible bonds with a $800 par value. These bonds are convertible into 90 shares of common stock. They have a 16% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 12%.

a.Calculate the straight bond value of this bond.

b. Calculate the conversion (or stock) value of the bond when the market price is $16 per share of common stock.

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