1. Consider the convertible bond by Miser Electronics: par value is $1, 000; coupon rate is 8.5%; market price of convertible bond is $900; conversion ratio is 30; estimated straight value of bond is $700. Assume that the price of Miser Electronics common stock is $25 and that the dividend per share is $1 per annum. The favorable income differential per share is $1.8333 $1.4823 $1.1450 $1.2222 None of the options

2.

Consider the convertible bond by Miser Electronics: par value is $1, 000; coupon rate is 8.5%; market price of convertible bond is $900; conversion ratio is 30; estimated straight value of bond is $700. Assume that the price of Miser Electronics common stock is $25 and that the dividend per share is $1 per annum. The premium payback period is

		a) 2.7273
		b) 1.4824
		c) 3.4524
		d) 2.2224
		e) None of the options

3.

Consider the convertible bond by Miser Electronics: par value is $1, 000; coupon rate is 8.5%; market price of convertible bond is $900; conversion ratio is 30; estimated straight value of bond is $700. Assume that the price of Miser Electronics common stock is $25 and that the dividend per share is $1 per annum. Now suppose that the price of the common stock declines from $25 to $10. What would be the return realized if $25 had been invested in the common stock?

		-0.2222
		-0.6
		-0.5
		-0.1423
		None of the options

4

Consider the convertible bond by Miser Electronics: par value is $1, 000; coupon rate is 8.5%; market price of convertible bond is $900; conversion ratio is 30; estimated straight value of bond is $700. Assume that the price of Miser Electronics common stock is $25 and that the dividend per share is $1 per annum. Now suppose that the price of the common stock increases from $25 to $54. Why would the return be higher by investing in the common stock directly rather than by investing in the convertible bond?

		The conversion price is higher than $25
		The conversion price is lower than $25
		Because the price of the convertible is greater than $25
		Because the risk of holding the convertible is higher
		None of the options