Investinus inc issues a convertible bond with a face value


Investinus, Inc. issues a convertible bond with a face value of $120, with the option to convert the bond into 3 shares of stock in the company. Draw the payoff diagram of the convertible bond. Can you replicate the payoff diagram for the convertible bond with a portfolio consisting of a regular (i.e. non-convertible) bond and one or more call options on Investinus stock? (Assume calls are written on single shares of stock). If so, describe the portfolio of call sand (non-convertible) bonds which replicates the convertible bond.

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Business Management: Investinus inc issues a convertible bond with a face value
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