Herring Inc

Multiple Choice

Herring Inc. is considering issuing 15-year, 8% semiannual coupon, $1,000 face value convertible bonds at a price of $1,000 each. Each bond would be convertible into 25 shares of common stock. If the bonds were not convertible, investors would require an annual nominal yield of 10%. What is the straight-debt value of the bond at the time of issue?

A) $725.58
B) $763.76
C) $803.96
D) $846.28
E) $888.59