A Convertible Bond Is Selling for $1,222

Multiple Choice

A convertible bond is selling for $1,222.70.It has 10 years to maturity,a $1,000 face value,a coupon rate of 10 percent,and semiannual interest payments.Similar non-convertible bonds are priced to yield 4 percent per six months.The conversion ratio is 40.The stock currently sells for $30.13 a share.Calculate the convertible bond's option value.

A) $8.68
B) $22.70
C) $13.59
D) $17.50
E) $86.80