Alphabet Soup Inc. just issued a zero-coupon convertible bond with a face value $1,000 and time to maturity of 9 years (Assuming annual compounding). The conversion ratio is 25 shares. The appropriate interest rate is 10%. The current stock price is $12 per share. Each convertible is trading at $500 in the market. Requirement: What straight bond value is? conversion value is? the option value of the bond is. |