Given the follow information concerning a convertible Bond:
Coupon:6% ($ 60 dollars per $ 1,000 bond)
Exercise Price: $25
Maturity: 10 years
Call Price: $1,040
Price of Common Stock: $30
a. If this bond is nonconvertible, what would be its approximate value if comparable interest rates were 9% ?
b. How many shares can the bond be converted into ?
c. What is the value of the bond in terms of stock ?
d. What is the current minimum price that the bond will command ?
e. Is there a reason to anticipate that the firm will call the bond ?
f. What do investors receive if they do not convert the bond when it is called ?
g. If the bond is called, would it be advantageous to convert ?