Question: You have been hired to value a new 20-year callable, convertible bond. The bond has a 5.8 percent coupon rate, payable annually. The conversion price

You have been hired to value a new 20-year callable, convertible bond. The bond has a 5.8 percent coupon rate, payable annually. The conversion price is $150, and the stock currently sells for $32.20. The stock price is expected to grow at 12 percent per year. The bond is callable at $1,150; but based on prior experience, it won’t be called unless the conversion value is $1,250. The required return on this bond is 9 percent. What value would you assign to this bond?


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