Question: Suresh Singh, CFA, is analyzing a convertible bond. The characteristics of the bond and the underlying common stock are given in the following exhibit: Convertible

Suresh Singh, CFA, is analyzing a convertible bond. The characteristics of the bond and the underlying are given in the following exhibit:
Convertible Bond Characteristics
Par value ................... $1,000
Annual rate (annual pay) .......... 6.5%
Conversion ratio ................. 22
Market price .................. 105% of par value
Straight value ................. 99% of par value
Underlying Stock Characteristics
Current market price ............... $40 per share
Annual cash ............. $1.20 per share
Compute the bond’s:
a. Conversion value.
b. Market conversion price.

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