Sweeney Pies has issued a zero-coupon 11-year bond that can be converted into 10 Sweeney shares. Comparable straight bonds are yielding 9%. Sweeney stock is priced at $63 a share. (Assume a face value of $1,000 and semi-annual compounding.) a. Suppose that you had to make a now-or-never decision on whether to convert or to stay with the bond. Which would you do?

• Convert the bond

• Stay with the bond

b. If the convertible bond is priced at $476, how much are investors paying for the option to buy Sweeney shares? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. If, after one year, the value of the conversion option is unchanged, what is the value of the convertible bond?