Only answer E and F.

1. You are interested in buying ABC Company's securities. You can buy common stock at $42 per share. This stock pays $1.2 dividends per share. You can also buy a 8% annual coupon convertible bond maturing in 15 years that has a conversion ratio of 20. The convertible bond price is quoted at 105. a. What is the convertible bond price? (2 marks) b. What is the conversion value of the bond? (2 marks) c. What is the conversion price of the stock (conversion parity)? (2 marks) d. What is the conversion premium, in dollars and as a percentage? (2 marks) e. What is the bond's payback period? (2 marks) f. If comparably rated nonconvertible bonds sell to yield 9%, what is the investment value of the convertible? (2 marks)