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Vernon Glass Company has $ 2 0 million in 1 0 percent, $ 1 , 0 0 0 par value convertible bonds outstanding. The conversion
Vernon Glass Company has $ million in percent, $ par value convertible bonds outstanding. The conversion ratio is the stock price is $ and the bond matures in years. The bonds are currently selling at a conversion premium of $ over their conversion value.
If the price of the common stock rises to $ on this date next year, what would your rate of return be if you bought a convertible bond today and sold it in one year? Assume on this date next year, the conversion premium has shrunk from $ to $Hint: Calculate rate of return as Future bond price Current bond price Interest earnings Current bond priceDo not round intermediate calculations. Input your answer as a percent rounded to decimal places.
Answer is complete but not entirely correct.
tableRate of return,
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