Question: A convertible bond has the following features: Coupon ................. 5.25% Maturity .................. June 15, 2027 Market price of bond ............. $77.50 Market price of underlying

A convertible bond has the following features:

Coupon ................. 5.25%
Maturity .................. June 15, 2027
Market price of bond ............. $77.50
Market price of underlying common stock ............ $28.00
Annual dividend ........... ... $1.20
Conversion ratio ........... ... 20.83 shares

Calculate the conversion premium for this bond.

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