Conversion bond Craig's Cake Company has and outstanding issue of 15-year convertible bonds with the $1,000 par value. These bonds are convertible in 80 shares of common stock. They've a 13% annual coupon interest rate, whereas the interest rate upon strait bonds of similar risk is 16%.
a) Find out the strait bond value of this bound.
b) Find out the conversion (or stock) value of the bond when the market price is $9, $12, $15, and $20 per share of common stock.
c) For each of the common stock prices given in part b, at what price would you expect the bond to sell?
d) Make a graph of the straight value and conversion