Multiple Choice
A convertible bond is selling for $993. It has 15 years to maturity, $1,000 face value, and pays 8 percent coupon interest payments annually. Similar straight bonds (nonconvertible) are priced to yield 8.5 percent. The conversion ratio is 20. The stock is currently selling for $45. Calculate the convertible bond's option value.
A) $34.52
B) $93.00
C) $7.00
D) $58.48
Correct Answer:
Verified
Correct Answer:
Verified
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