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A Convertible Bond Is Selling for $993

Question 34

Multiple Choice

A convertible bond is selling for $993.It has 15 years to maturity,$1,000 face value,and pays 8% coupon interest payments annually.Similar straight bonds (nonconvertible) are priced to yield 8.5%.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

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