The conversion ratio is 20 the stock is currently selling


A convertible bond is selling for $993 (99.3% of face value). It has 15 years to maturity and pays 8% coupon interest payments annually. Similar straight bonds (nonconvertible) are priced to yield 8.5%. The conversion ratio is 20. The stock is currently selling for $45. Calculate the convertible bond’s option value.

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Financial Management: The conversion ratio is 20 the stock is currently selling
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