A Convertible Bond Is Selling for $800,matures in 10 Years,has

Multiple Choice

A convertible bond is selling for $800,matures in 10 years,has a face value of $1,000,and a coupon rate of 10 percent.Similar nonconvertible bonds are priced to yield 14 percent.The conversion price is $32.The stock currently sells for $31.30 a share.What is the conversion premium?

A) 0 percent
B) 1.67 percent
C) 2.50 percent
D) 3.33 percent
E) 2.24 percent