Standard Olive Company of British Columbia has a convertible bond outstanding with a coupon rate of9 percent payable semiannually, and a maturity date of 15 years. The bond maturity value is $1,000. It is rated A, and competitive nonconvertible bonds of the same risk class carry a 10 percent return. The conversion ratio is 25. Currently, the common stock is selling for $30 per share on the Venture Exchange.

a. What is the conversion price?

b. What is the conversion value?

c. Compute the pure bond value. (Use semiannual analysis.)

d. Draw a graph that includes the floor price and the conversion value but not the convertible bond price. For the stock price on the horizontal axis, use 10, 20, 30, 40, 50, and 60.

e. Which will influence the bond price more-the pure bond value (floor value) or the conversion value?