Given the following information concerning a convertible bond: (15 points)

Principal: $1000; Maturity date: 20 years; Interest: $50;

Call Price: $1050: Exercise Price: $40 per share. (15 points)

a. The bond may be converted into how many shares?

b. If comparable nonconvertible debt offered an annual yield of 10 percent, what would be the value of this bond as debt?

c. If the stock were selling for $48, what is the value of the bond in terms of stock?

d. If the bond were selling for $1400, what are the premiums paid over the bonds value as (1) stock, and (ii) debt?

e. If the price of the stock were $44, what would be the minimum price of the bond?

f. If the price of the stock were $50, what would the investor receive if the bonds were called? What would the investor receive if the bonds were called and the investor did not convert?

g. What would the investor receive when the bond matures?

h. If the price of the stock were $30, would the minimum price of the bond?

i. If the price of the stock were $30, would the investor convert the bond if it were called?