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 current cost of 5-year debt is 3% assuming semi-annual interest payments.

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?