Question: Calculating Values for Convertibles You have been hired to value a new 30-year callable, convertible bond. The bond has a 7 percent coupon, payable annually,

Calculating Values for Convertibles You have been hired to value a new 30-year callable, convertible bond. The bond has a 7 percent coupon, payable annually, and its face value is $1,000. The conversion price is $60, and the stock currently sells for $50.

a. What is the minimum value of the bond? Comparable nonconvertible bonds are priced to yield 9 percent.

b. What is the conversion premium for this bond?

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