A Convertible Bond Is Selling for $967,matures in 15 Years,has

Multiple Choice

A convertible bond is selling for $967,matures in 15 years,has a $1,000 face value,pays interest semiannually,and has a coupon rate of 8 percent.Similar non-convertible bonds are priced to yield 4.25 percent per six months.The conversion ratio is 20.The stock currently sells for $47.50 a share.Calculate the convertible bond's option value.

A) $2.92
B) $7.27
C) $2.03
D) $8.95
E) $1.48