In the spring of year 2000, Silicon Valley is considering the issue of a convertible bond. The issue would consist of 20 year convertible bonds that would sell at a price of $1,000 per bond. The bond would pay 10% annual coupon interest rate. Each bond would be convertible into 20 shares of stock; the conversion price being $50.00. The stock was expected to pay a dividend of $2.80 during the coming year and it sold at $35.00 per share. Further the stock price was expected to grow at a constant rate of 8% per year. If the bonds were not convertible, they would offer a yield of 13%. Assuming that the bonds will be converted at year 10 when they become callable. A. What is the floor value? B. What will be the expected return on the convertible?