Hired to value new ten-year callable-convertible bond

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You have been hired to value a new 10-year callable, convertible bond. The bond has a 5.6 per cent coupon rate, payable annually. The conversion price is $150, and the equity currently sells for $44.75. The share price is expected to grow at 8 per cent per year. The bond is callable at $1,100 but based on prior experience it will not be called unless the conversion value is $1,200. The required return on this bond is 6 per cent. What value would you assign to this bond?

Reference no: EM131327373

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