A $1,000 semi-annual convertible bond has a 4% coupon rate, a conversion ratio of 20, and five years to maturity. The common stock has a market price of $45. The relevant discount rate is 7%.
What is the floor value of the convertible bond?
A) $708.92
B) $875.25
C) $900.00
D) $1,000.00
E) $1,124.75
Correct Answer:
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