Question: 5. Answer the below questions. a. Suppose that a convertible bond has a conversion ratio of 20 and a delta of 0.70. For a price

5. Answer the below questions.

a. Suppose that a convertible bond has a conversion ratio of 20 and a delta of 0.70. For a price change of $0.125 for the stock price per share, what is the approximate change in the convertible bonds value?

=.70*20*.125=$1.75

b. How many shares of the stock must be shorted in order to create a market neutral position by holding the convertible bond and shorting the stock?

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