Merdeka securities recently issued a 20-year convention bond with a face value of $1000. The bonds will pay an annual coupon rate of 10%. At any time before maturity on August 15, 2041, bondholders can exchange the bonds for 32 shares of common stock. The stock is expected to pay a dividend of $2.80 over the coming years, and is currently selling for $35 per share. If the bonds are not convertible, the company must offer a 10% yield.

Question :

1. What is the conversion price and conversion value of the bonds at the time of issuance?

2. What is the price of a non-convertible bond?