How does the volatility of a stock influence the conversion premium?
Answer to relevant QuestionsA convertible bond has a face value of $1,000, and the conversion price is $50 per share. The stock is selling at $42 per share. The bond pays $60 per year interest and is selling in the market for $930. It matures in 15 ...Compute the downside risk as a percentage in problem 1. What does this mean? Explain how options can be used to protect a short position. A stock has an exercise (strike) price of $40. a. If the stock price goes to $41.50, is the exchange likely to add a new strike price? b. If the stock price goes to $42.75 is the exchange likely to add a new strike price? Assume an investor writes a call option for 100 shares at a strike price of 30 for a premium of 5.75. This is a naked option. a. What would the gain or loss be if the stock closed at 26? b. What would the break-even point be ...
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