A 13-year maturity convertible bond with a face value of $1,000 and a 8% coupon on a company with a bond rating of Aaa is selling fo $1,090. The bond pays interest annually. Each bond can be exchanged for 20 shares, and the stock price currently is $50 per share. Other Aaa-rated bonds with the same maturity would sell at a yield to maturity of 10%. What is the value of the bondholders' call option? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of call option
A 13-year maturity convertible bond with a face value of $1,000 and a 8% coupon on a company with a bond rating of Aaa is selling fo $1,090. The bond pays interest annually. Each bond can be exchanged for 20 shares, and the stock price currently is $50 per share. Other Aaa-rated bonds with the same maturity would sell at a yield to maturity of 10%. What is the value of the bondholders' call option? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of call option
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 16P
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![A 13-year maturity convertible bond with a face value of $1,000 and a 8% coupon on a company with a bond rating of Aaa is selling for
$1,090. The bond pays interest annually. Each bond can be exchanged for 20 shares, and the stock price currently is $50 per share.
Other Aaa-rated bonds with the same maturity would sell at a yield to maturity of 10%. What is the value of the bondholders' call
option? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Value of call option](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F070cca26-a62e-4ff5-8db1-2d32fcf8790c%2F190c3eb6-35f2-4f7b-a091-64d70287e6df%2F0ljkxt_processed.png&w=3840&q=75)
Transcribed Image Text:A 13-year maturity convertible bond with a face value of $1,000 and a 8% coupon on a company with a bond rating of Aaa is selling for
$1,090. The bond pays interest annually. Each bond can be exchanged for 20 shares, and the stock price currently is $50 per share.
Other Aaa-rated bonds with the same maturity would sell at a yield to maturity of 10%. What is the value of the bondholders' call
option? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Value of call option
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