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Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of...

Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,000, can be converted into common shares at a rate of 61.2895 shares of stock per $1,000 face value bond (the conversion rate), or $16.316 per share. Hilton’s common stock is trading (on the NYSE) at 15.90 per share and the bonds are trading at $975. a) Calculate the conversion value of each bond. b) Determine if it is currently profitable for bond holders to convert their bonds into shares of Hilton Hotels common stock.

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