Suppose a company issued $10-$year convertible bonds with a coupon rate of $6\%.$ The face value of the bonds is $$1000,$ and the coupons are paid semi$-$annually. The convertible bonds were priced at $98\%$ of par value. If the company were to issue straight bonds, the yield would be $10\%.$

For a single convertible bond, what amount should be considered debt? what amount should be considered equity?

Convertible Bond $=$ Straight Bond $+$ Convertible Option