Question: A(n) 8. 8 % convertible bond carries a par value of$1,000 and a conversion ratio of 18. Assume that an investor has$5,000 to invest and

A(n) 8.8% convertible bond carries a par value of$1,000 and a conversion ratio of 18. Assume that an investor has$5,000 to invest and that the convertible sells at a price of $1000(which includes a 28% conversion premium). How much total income(coupon plus capitalgains) will this investment offerif, over the course of the next 12months, the price of the stock moves to $69.86 per share and the convertible trades at a price that includes a conversion premium of 13%? What is the holding period return on this investment? Finally, given the information in theproblem, determine what the underlying common stock is currently selling for.

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