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The 10% convertible bonds of Starchwhite are quoted at $142 per $100 nominal. The earliest date for conversion is in four years time , at

The 10% convertible bonds of Starchwhite are quoted at $142 per $100 nominal. The earliest date for conversion is in four years time , at the rate of 30 ordinary shares per $100 nominal bond. The share price is currently $4.15. annual interest on the bonds has just been paid.

Required

  1. Calculate the current conversion value
  2. Calculate the conversion premium and comment on its meaning

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