Question: Your firm has a convertible bond with 3 years to maturity and a $1000 face value.The annual coupon rate is equal to 9%.Similar nonconvertible bonds

Your firm has a convertible bond with 3 years to maturity and a $1000 face value.The annual coupon rate is equal to 9%.Similar nonconvertible bonds are priced to yield 12%.The current price of the convertible bond is 15% more than the price of the nonconvertible bond.Each bond can be converted into 25 shares of stock. If stock price is $26, find the bond's option premium.Will the bond holder convert the bond? Explain. If any assumptions had to be made, please indicate the assumptions

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