Question 14 (answer all parts) a) Explain what a convertible bond is. Describe how a convertible bond is priced on the market before its expiration, also using a graph. (6 marks) b) What is a timing real option? Why should financial managers take such option into account when it is embedded in a project and which decision rule should the manager follow? In the context of the Black-Scholes model, what are the variables that affect the value of a timing real option? (6 marks) c) Briefly describe the different sources of equity financing for private firms. Which one is preferable? Why? (6 marks) d) Discuss and demonstrate in detail how in a perfect capital market, dividend policy of a firm has no effect on its stock price. (17 marks) (TOTAL 35 MARKS)