One year has passed and Ytel€™s common equity price has increased to $51 per share. Also, over the year, the interest rate on Ytel€™s nonconvertible bonds of the same maturity has increased, while credit spreads remained unchanged. Name the two components of the convertible bond€™s value. Indicate whether the value of each component should increase, stay the same, or decrease in response to the increase on Ytel€™s common equity and the increase in interestrates.

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Characteristic Par value Coupon (annual payment Current market price Straight bond value Conversion ratio Conversion option Dividend Expected market price in one year Convertible Bond Common Equity $1,000 4% $980 $925 25 At any time $35 per share $0 $1,125 $45 per share