Manpower Electric Company has 6 percent convertible bonds outstanding. Each bond has a $1,000 par value. The conversion ratio is 20, the stock price is $38, and the bonds mature in 21 years.

a. What is the conversion value of the bond?

b. Assume that after one year the common share price falls to $30.20. What is the conversion value of the bond? (Round the final answer to 2 decimal places.)

c. Also, assume that after one year interest rates go up to 10 percent on similar bonds. There are 20 years left to maturity. What is the pure value of the bond? Use semiannual analysis. (Use a Financial calculator to arrive at the answers. Round the final answer to 2 decimal places.)

d. Will the conversion value of the bond (part b) or the pure value of the bond (part c) have a stronger influence on its price in the market?

- Conversion value of the bond

- Pure value of the bond

e. If the bond trades in the market at its pure bond value, what would be the conversion premium (stated as a percentage of the conversion value)? (Do not round the intermediate calculations. Round the final answer to 2 decimal places.)