You have bought the exchange-listed convertible bonds of a company today on Jan 2, 20X1, immediately...

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You have bought the exchange-listed convertible bonds of a company today on Jan 2, 20X1, immediately after the coupon payment. The bond has the following features: Coupon rate of 5.20% (compounded semi-annually, coupon payable every six months); yield-to-maturity of 3.43% (compounded semi-annually); maturity on Jan 2 of 20X9; and coupon payable on every Jan 2 and Jul 2. Each $1,000 face value convertible bond converts into 30 company shares. Comparable plain-vanilla (non- convertible) bonds with the same maturity, coupon, and credit risk are yielding 4.33% compounded semi-annually. The company shares are currently trading at $36.25 per share. The company doesn't pay any dividend. The delta of long-dated, at-the- money call options on the company's shares is 0.525 and is not expected to change with short-term changes in prices of the underlying. What is the implied value today of each call option (per share) embedded in the company's convertible bonds? $2.046 $2.100 $2.154 $2.208 $2.262 You have bought the exchange-listed convertible bonds of a company today on Jan 2, 20X1, immediately after the coupon payment. The bond has the following features: Coupon rate of 5.20% (compounded semi-annually, coupon payable every six months); yield-to-maturity of 3.43% (compounded semi-annually); maturity on Jan 2 of 20X9; and coupon payable on every Jan 2 and Jul 2. Each $1,000 face value convertible bond converts into 30 company shares. Comparable plain-vanilla (non- convertible) bonds with the same maturity, coupon, and credit risk are yielding 4.33% compounded semi-annually. The company shares are currently trading at $36.25 per share. The company doesn't pay any dividend. The delta of long-dated, at-the- money call options on the company's shares is 0.525 and is not expected to change with short-term changes in prices of the underlying. What is the implied value today of each call option (per share) embedded in the company's convertible bonds? $2.046 $2.100 $2.154 $2.208 $2.262

Answer rating: 100% (QA)

The implied value of the call option is calc... View the full answer