Question: A convertible bond is selling for $ 1 , 2 2 2 . 7 0 . It has 1 0 years to maturity, a $

A convertible bond is selling for $1,222.70. It has 10 years to maturity, a $1,000 face value, a coupon rate of 10 percent, and semiannual interest payments. Similar non-convertible bonds are priced to yield 4 percent per six months. The conversion ratio is 40. The stock currently sells for $30.13 per share. Calculate the convertible bond's option value.

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