T-Mobile Wi-Fi 2:35 PM EmbeddedOptionsProblems.docx Embedded Options 1) Are coupons lower or higher than regular bond rates 2) Are callable bond coupons higher or lower than 3) If a regular 30 year bond is 4% and a 30 year bond for convertibles? regular bonds? that is callable after 10 years is 5%, what is the approximate value of the call option? 4) Your company needs $100 million for expansion and decides to issue a 5-year convertible bond. The stock price currently is $41.67 and your banker recommends a 20% conversion premium. The total option value of the convertible will be $92.22 per $1,000 face amount of bond. The company's 3%, assuming semi-annual interest payments. current cost of 5-year debt is What should be the annual coupon of the convertible bond assuming you want the bond to trade at par? The coupon will be paid semi-annually How many shares will each $1,000 bond convert? What is the return for an investor if the stock price in 5 years is 60