You are considering to buy a convertible bond with a face, Financial Management

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You are considering to buy a convertible bond with a face

You are considering to buy a convertible bond with a face value of 1000, trading at 120% of face value. The conversion ratio at maturity is 120.

a. What is the conversion price?

b. If you expect the company’s stock price at the maturity date is $9, in what conditions you will buy this bond? Suppose you buy this bond and hold it to the maturity date, will you choose to convert the bond into shares?

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