The bond may be converted into how many shares

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A convertible bond has the following features (rounding allowed in answers):

Face Value: $1,000

Maturity: 10 years

Annual coupon: $50

Conversion Price: $40

a. The bond may be converted into how many shares?

b. What is the current value of the convertible as a bond if prevailing interest rates are 6% (n=10)?

c. What is the current value of the convertible as a stock if the current stock price is $38 per share?

d. Based on (b) and (c) and assuming a market premium of $40, what should the current price of the convertible bond be?

Reference no: EM13944537

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