Exam 16: Option Contracts

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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) BioTech Industries has debentures outstanding (par value $1,000) convertible into the company's common stock at $30. The coupon rate is 11 percent payable semiannually, and they mature in 10 years. -Refer to Exhibit 16.9. Calculate the conversion value of the bond if the stock price is $27.00 per share.

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The binomial model is a continuous method for valuing options.

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