Today is the morning of Jan 2, Year 5. XYZ Inc has exchange-listed convertible bonds outstanding....

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Today is the morning of Jan 2, Year 5. XYZ Inc has exchange-listed convertible bonds outstanding. The coupon rate is 8.59% with the coupon payable every six months. The yield is 7.33% compounded semi-annually. The maturity is on July 2, Year 14 (i.e. in 9.5 years), and the coupon is payable every January 2 and July 2. Each $1,000 face value convertible bond converts into 59 XYZ shares. The XYZ shares are currently trading at $18.73 per share. The delta of long-dated, at-the-money XYZ call options is 0.8 and is not expected to change with short-term changes in prices of the underlying. Comparable plain-vanilla (non-convertible) bonds with the same maturity, coupon, and credit risk are yielding 7.75%. What is the revised expected price of one convertible bond today if the plain-vanilla bond yields drop by 25 basis points and the share price rises to $20.99 per share? O $1,088.27 O $1,118.50 $1,148.73 O $1,178.96 O $1,209.19 Today is the morning of Jan 2, Year 5. XYZ Inc has exchange-listed convertible bonds outstanding. The coupon rate is 8.59% with the coupon payable every six months. The yield is 7.33% compounded semi-annually. The maturity is on July 2, Year 14 (i.e. in 9.5 years), and the coupon is payable every January 2 and July 2. Each $1,000 face value convertible bond converts into 59 XYZ shares. The XYZ shares are currently trading at $18.73 per share. The delta of long-dated, at-the-money XYZ call options is 0.8 and is not expected to change with short-term changes in prices of the underlying. Comparable plain-vanilla (non-convertible) bonds with the same maturity, coupon, and credit risk are yielding 7.75%. What is the revised expected price of one convertible bond today if the plain-vanilla bond yields drop by 25 basis points and the share price rises to $20.99 per share? O $1,088.27 O $1,118.50 $1,148.73 O $1,178.96 O $1,209.19

Answer rating: 100% (QA)

Option a 108827 discount factor present cash period cash flow 3665 flow 1 4295 0965 4... View the full answer