In 1996 Marriott International made an issue of unusual bonds called liquid yield option notes, or LYONS. The bond matured in 2011, had a zero coupon, and was issued at $552.15. It could have been converted into 8.96 shares. Beginning in 1999 the bonds could have been called by Marriott. The call price was $623.71 in 1999 and increased by 3.3% a year thereafter. Holders had an option to put the bond back to Marriott in 1999 at $623.71 and in 2006 at $782.60. At the time of issue the price of the common stock was about $51.50.

a.	What was the yield to maturity on the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Yield maturity

%

b.	Assuming that comparable nonconvertible bonds yielded 12.0%, how much were investors paying for the conversion option? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Conversion option

$

c.	What was the conversion value of the bonds at the time of issue?(Round your answer to 2 decimal places.)

Conversion value

$

d.	What was the initial conversion price of the bonds? (Round your answer to 2 decimal places.)

Conversion price

$

e.	What was the conversion price in 2005? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Conversion price

$

f.

If the market price falls to the put exercise price, would you have put the bond back to Marriott?

	Yes
	No

g-1.	At what price could Marriott have called the bonds in 2006? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Call price

$

g-2.

If the price of the bond in 2006 was more than this, should Marriott have called them?

	Yes
	No