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QUESTION
A convertible bondissellingfor$1,160.Ithas 5 years to maturity, a $1,000 face value, and an 8% coupon paid annually. Similar straight bonds...
A convertible bond is selling for $1,160. It has 5 years to maturity, a $1,000 face value, and an 8% coupon paid annually. Similar straight bonds (non-convertible bonds) are priced at $1,020. The conversion ratio is 20. The stock currently sells for $45 per share. The component of the convertible bond's price related to the conversion option valueis:
