Question: Determine whether the value of a callable convertible bond will increase, decrease, or remain unchanged if there is an increase in stock price volatility. What

Determine whether the value of a callable convertible bond will increase, decrease, or remain unchanged if there is an increase in stock price volatility. What if there is an increase in interest rate volatility? Justify each of yourresponses.

Convertible Bond Characteristics $1,000 Par value Annual coupon rate (annual pay) Conversion ratio Market price Stralght value 6.5% 105% of par 99% of par Underlying Stock Characteristics Current market price Annual cash dividend $40 per share 51.20 per share

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