You work in the Finance Department of a large Life Insurance Company. Youre your firm is considering the purchase of the issue of a new Convertible Bond issue by the Elkco Co. You have been assigned to establish a reasonable price for these securities.

These bonds have a Face Value $1,000, mature in five years, and pay 3.50% annual coupons. They are convertible into 25 shares of stock during their life.

The firm also has a straight bond issue outstanding that has a Face Value $1,000, by chance they also mature in five years, and pay 6.75% annual coupons. These securities are currently trading for $1,064.50.

Elkcos stock is currently trading for $36.75 per share, and you feel that 0.36 is a reasonable estimate for the Sigma of the firms stock.

If the convertible bond did not have the conversion option, what would be its value as a straight bond? (The answer is in dollar, round to two decimal places, e.g. 1046.75)