Multiple Choice
A convertible bond pays interest annually at a coupon rate of 5 percent on a par value of $1,000.The bond has 10 years maturity remaining and the discount rate on otherwise identical non-convertible debt is 6.5 percent.The bond is convertible into shares of common stock at a conversion price of $25 per share (i.e.the bond is exchangeable for 40 shares) .Today's closing stock price was $20.What is the floor value of this bond?
A) $800.00
B) $892.17
C) $1,250
D) none of the options
Correct Answer:
Verified
Correct Answer:
Verified
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