1. A convertible bond has a coupon of 7 percent, paid semiannually, and will mature in 18 years. If the bond were not convertible, it would be priced to yield 6 percent. The conversion ratio on the bond is 20 and the stock is currently selling for $40 per share. What is the minimum value of this bond?
2. Consider a 30-year, $150,000 mortgage with a rate of 6.10 percent. Eleven years into the mortgage, rates have fallen to 5 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate?