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A convertible bond has a face value of $1,000 and the conversion price is $40 per share. The stock is selling at $40 per share

/in /by

A convertible bond has a face value of $1,000 and the conversion price is $40 per share. The stock is selling at $40 per share. The bond pays $55 per year in interest and is selling in the market for $975. It matures in 7 years. Market rates are 10% annually.

(I) What is the conversion ratio? 

(II) What is the conversion value?

 
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