### Bonds are currently selling at a conversion premium

Assignment Help Financial Management
##### Reference no: EM131526727

Vernon Glass Company has \$30 million in 10 percent convertible bonds outstanding. The conversion ratio is 40, the stock price is \$18, and the bond matures in 25 years. The bonds are currently selling at a conversion premium of \$45 over their conversion value.

If the price of the common stock rises to \$24 on this date next year, what would your rate of return be if you bought a convertible bond today and sold it in one year? Assume on this date next year, the conversion premium has shrunk from \$45 to \$20. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Rate of return %

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