Suppose that a convertible bond has a conversion ratio of


Question: a. Suppose that a convertible bond has a conversion ratio of 20 and a delta of 0.70. For a price change of $0.125 for the stock price per share, what is the approximate change in the convertible bond's value?

b. How many shares of the stock must be shorted in order to create a market-neutral position by holding the convertible bond and shorting the stock?

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Finance Basics: Suppose that a convertible bond has a conversion ratio of
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