You can invest in taxable bonds that are paying a yield of $8\mathrm{.}6$ percent or a municipal bond paying a yield of $7\mathrm{.}15$ percent. Assume your

marginal tax rate is $28$ percent.

a$.$ Calculate the after$-$tax rate of return on the taxable bond?

Note: Round your percentage answer to $2$ decimal places $($e$.$g$.,32\mathrm{.}16).$

b$.$ Which security bond should you buy?

a$.$ Rate of return

b$.$ The security bond one should buy is:

Gentherm Incorporated has a convertible bond issue outstanding. Each bond, with a face value of $$1,200,$ can be converted into

common shares at a rate of $42\mathrm{.}25$ shares of stock per $$1,200$ face value bond $($the conversion rate$),$ or $$19\mathrm{.}5762$ per share. Gentherm's

common stock is trading $($on the NYSE$)$ at $$19\mathrm{.}16$ per share and the bonds are trading at $$1,175.$

a$.$ Calculate the conversion value of each bond.

Note: Round your answer to $4$ decimal places $($e$.$g$.,32\mathrm{.}1616).$

b$.$ State whether it is currently profitable for bond holders to convert their bonds into shares of Gentherm common stock.

a$.$ Conversion value

b$.$ Exercise the conversion option