1. The common stock of Bike Tours, Inc. pays no dividend, and has a market price of $80 per share. Bike Tours' 8% ($80 annual coupon) convertible bond sells at 128% of the par value ($1280), and is convertible into common at a stock price of $100 per share. The conversion premium for Bike Tours' convertible bond is __________.
a. $480
b. $280
c. $1000
d. $800
2. A more accurate measure of the change in bond price due to changes in yield to maturity can be found using both modified duration and __________.
a. time to maturity
b. Macaulay duration
c. convexity
d. conversion premium