Lowrey Metals Company has a 1 000 convertible bond outstanding that
Lowrey Metals Company has a $1,000 convertible bond outstanding that has a market value of $1,100. It has a coupon rate of 7 percent and matures in 10 years. The conversion price is $40. The common stock currently is selling for $37.
a. What is the conversion premium (in percentage terms)?
b. At what price does the common stock need to sell for the conversion value to be equal to the current bond price?
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