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Given the follow information concerning a convertible Bond:
a. What is current yield of this bond ?
b. What is the value of the Bond based upon the market price of the common stock ?
c. What is the value of the common stock based upon the market price of the bond ?
d. What is the premium in terms of stock that the investor pays when he or she purchases the convertible bond instead of the stock ?
e. Non-convertible bonds are selling at with a yield to maturity of 7 percent. If the this bond lacked a conversion feature, what would the approximate price of the bond be ?
f. What is the premium in terms of debt that the investor pays when he or she purchases the convertible bond instead of the non-convertible bond ?
g. What is the probability the corporation will call this bond ?
h. Why are investors willing to pay the premiums mentioned in questions d and f ?
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