You know the following information with regard to a convertible bond: Coupon 6%, exercise price $25, Maturity of 20 years, call price of $1,040, and the price of the common stock is $30.

1. If this bond were not convertible, what would it be worth if comparable rates were 12%?
2. Into how many shares can the bond be converted?
3. What is the value of the bond in terms of stock?
4. What is the current minimum price that the bond will command?

5. If the current market price of the bond is $976, what should you do?

   A. Buy

   B. Don't buy

   C. Nothing