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Problem 25-27 Convertible Bonds A 10-year maturity convertible bond with a 6% annual coupon on a company with a bond rating of AAA is
Problem 25-27 Convertible Bonds A 10-year maturity convertible bond with a 6% annual coupon on a company with a bond rating of AAA is selling for $1,035. Each bond can be exchanged for 50 shares, and the stock price currently is $20 per share. Other AAA-rated bonds with the same maturity would sell at a yield to maturity of 8%. What is the value of the implicit call option on the bond (show work for partial marks)? Round your answer to two decimal places (e.g., 259.341533 would be 259.34). References
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