Question: A 10-year maturity convertible bond with a face value of $1,000 and a 6% coupon on a company with a bond rating of Aaa is

A 10-year maturity convertible bond with a face value of $1,000 and a 6% coupon on a company with a bond rating of Aaa is selling for $1,050. The bond pays interest annually. Each bond can be exchanged for 20 shares, and the stock price currently is $50 per share. Other Aaa-rated bonds with the same maturity would sell at a yield to maturity of 8%. What is the value of the bondholders' call option?

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