A convertible bond is selling for $993. It has 15 years to maturity, a $1,000 face value, and a 8% coupon paid semi-annually. Similar non-convertible bonds are priced to yield 8.5%. The conversion ratio is 20. The stock currently sells for $47.50 per share. Calculate the convertible bond's option value.

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The Answer of A convertible bond is selling for $993. It has 15 years to maturity, a $1,000 face value, and a 8% coupon paid semi-annually. Similar non-convertible bonds are priced to yield 8.5%. The conversion ratio is 20. The stock currently sells for $47.50 per share. Calculate the convertible bond's option value.

A Convertible Bond Is Selling for $993