Problem 24-11 Calculating Values for Convertibles [LO6]

You have been hired to value a new 20-year callable, convertible bond. The bond has a 7.6 percent coupon, payable semiannually, and its face value is $1,000. The conversion price is $71, and the stock currently sells for $58.

a.	What is the minimum value of the bond? Comparable nonconvertible bonds are priced to yield 8 percent. (Do not round your intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Minimum value of the bond

$

b.	What is the conversion premium for this bond? (Round your answer to 2 decimal places. (e.g., 32.16))

Conversion premium

%