A convertible bond has a 8.5 percent coupon, paid semiannually, and will mature

Question

A convertible bond has a 8.5 percent coupon, paid semiannually, and will mature in 15 years. If the bond were not convertible, it would be priced to yield 7.5 percent. The conversion ratio on the bond is 30 and the stock is currently selling for $62 per share. What is the minimum value of this bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

  Minimum value

$

A convertible bond has a 8.5 percent coupon, paid semiannually, and will mature in 15 years. If the bond were not convertible, it would be priced to yield 7.5 percent. The conversion ratio on the bond is 30 and the stock is currently selling for $62 per share. What is the minimum value of this bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

Face value (FV) $                                           1,000 Coupon rate 8.50% Number of compounding periods per year 2 Interest per period (PMT) $                                           42.50 Number of years to maturity 15 Number of compounding periods till maturity (NPER) 30 Market rate of return/Required rate of return 7.5% Market rate of return/Required rate of return per period (RATE) 3.8% Bond price PV(RATE,NPER,PMT,FV) Bond price $                                     1,089.15 PV(3.75%,30,42.5,1000)*-1

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