Price a convertible bond with par=$1000, conversion ratio=20, annual coupon rate=9.4%, and 2 years to maturity. The bond is callable at 102% par in year 1, and convertible from year 1 through maturity. Assume annual compounding, a constant one-year discount rate of 10%, and the following binomial model for stock price evolution. Round your answer to 2 decimal places. t=0 49.33 t = 1 60.25 42.56 t=2 70.89 49.33 34.31
Price a convertible bond with par=$1000, conversion ratio=20, annual coupon rate=9.4%, and 2 years to maturity. The bond is callable at 102% par in year 1, and convertible from year 1 through maturity. Assume annual compounding, a constant one-year discount rate of 10%, and the following binomial model for stock price evolution. Round your answer to 2 decimal places. t=0 49.33 t = 1 60.25 42.56 t=2 70.89 49.33 34.31
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Price a convertible bond with par=$1000,
conversion ratio=20, annual coupon
rate=9.4%, and 2 years to maturity. The
bond is callable at 102% par in year 1, and
convertible from year 1 through maturity.
Assume annual compounding, a constant
one-year discount rate of 10%, and the
following binomial model for stock price
evolution. Round your answer to 2 decimal
places.
t = 0
t = 1
t = 2
70.89
60.25
49.33
49.33
42.56
34.31
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