• A convertible bond issued by Dionland has par value of $1000, coupon rate of 8.8% (interest paid annually), maturity of 12 years , and conversion ratio of 54. The market perceives that 12 years from now the shares of Dionland are equally likely to be worth $21.28, $36.16 or $48.59. The term structure is assumed to be flat at 10.0%. Assume that investors delay conversion until after they receive their last coupon. What should be the price of the convertible bond?

  
  

Answer rating: 100% (QA)

To find the price of the convertible bond we need to calculate the present value of its cash flows T... View the full answer