Chapter 20, Problem 4CP

a.

Summary Introduction

To calculate: Conversion price and expected one year return rate for convertible bond and equity bond for Ytel convertible bond with the help of given information.

Introduction:

Market conversion price: When bond is bought then investor pays that value to buy that stock, that price is called market conversion price.

b.

Summary Introduction

To explain: Effect of the equity price and interest rates on the components of bonds and how the response to the changes mentioned.

Introduction:

Convertible bonds: Convertible bonds are those bonds that are convert into other common equity after a period of time or after the maturity period of bond.