Question

A(n) 9% Convertible bond carries a par value of $1,000 and a conversion ratio of 21. Assume that an investor has $5,000 to invest and that the convertible sells at a price of $1,000 (which includes a 28% conversion Premium). How much Total Income (coupon plus capital gains) will this investment offer if, over the course of the next 12 months, the price of the stock moves to $88.49 per share and the convertible trades at a price that includes a conversion premium of 13%? What is the holding period return on this investment? Finally, given the information in the problem, determine what the underlying common stock is currently selling for.

-The total income​ (coupon plus capital​ gains) this investment will offer is $ .​(Round to the nearest​ cent.)

-The holding period return on this investment is %. (Round to two decimal​ places.)

-The price that the underlying common stock currently selling for is $. ​(Round to the nearest​ cent.)

Answer 1