Question: You have been hired to value a new 30-year callable, convertible bond. The bond has a coupon rate of 3.2 percent, payable semiannually, and its

You have been hired to value a new 30-year callable, convertible bond. The bond has a coupon rate of 3.2 percent, payable semiannually, and its face value is $1,000. The conversion price is $58, and the stock currently sells for $39.

a. What is the minimum value of the bond? Comparable nonconvertible bonds are priced to yield 4.9 percent.

b. What is the conversion premium for this bond?

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