Convertible Bonds. Consider the following convertible bond:
Par value = $1000
Coupon rate = 6.0%
Market price of convertible bond = $950
Conversion ratio = 30
Estimated value of option-free bond = $750
The current price of the common stock is $30 and the annual dividend is $1.50
Calculate the following:
a) Conversion value
b) Market conversion price
c) Market conversion premium ratio
d) Market value of convertible bond if stock price is $40