A convertible bond has a 8% coupon and 15 years to maturity. The face value is $1,000 and the conversion ratio is 40. The stock currently sells for $20.875 per share. Similar nonconvertible bonds are priced to yield 9%. The value of the convertible bond is at least:

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The value of a convertible bond is at least the greater of its investment value or its conversion value. The investment value is calculated based on the present value of its coupon payments and the present value of its face value, discounted at the yield of similar nonconvertible bonds. The conversion value is calculated based on the current price of the stock and the conversion ratio. Investment value calculation:- Coupon payments: 8% of $1,000 = $80 per year.- Present value of coupon payments for 15 years at 9% yield: $80 * Annuity factor (9%, 15 years).- Present value of face value: $1,000 / (1 + 0.09)^15.- Sum these two present values for the investment value.Conversion value calculation:- Conversion ratio: 40 shares per bond.- Current stock price: $20.875.- Conversion value = 40 * $20.875.Without doing the exact math, we know the conversion value is $835 (40 * $20.875). The investment value is typically higher than the conversion value when the bond's coupon rate is higher than the yield of similar nonconvertible bonds, as is the case here. Therefore, the correct answer is the one that is higher than the conversion value but reflects a realistic investment value for a bond with these characteristics, which is $919.39 (B).

A Convertible Bond Has a 8% Coupon and 15 Years