Problem 25-27 Convertible Bonds and Value of Implicit Call Option (LO4)

A 8-year maturity convertible bond with a 6% annual coupon on a company with a bond rating of AAA is selling for $1,091. Each bond can be exchanged for 50 shares, and the stock price currently is $20 per share. Other AAA-rated bonds with the same maturity would sell at a yield to maturity of 7%. What is the value of the implicit call option on the bond?(Round your answer to 2 decimal places.) 5 of 6 pointsRiskless profit$Why is the bond selling for more than the value of the shares it can be converted into?1 of 6 pointsThe bond is worth more than the shares it can be converted into because the bond has(Click to select)

an upper bound

a shorter life time

a "floor" value

.