You purchased one of big corp.’s 8%, 10-year convertible bonds…
Valuation – convertible bond. You purchased one of Big Corp.’s 8%, 10-year convertible bonds at its $1,000 par value a year ago when the company’s common stock was selling for $20. Similar bonds without a conversion feature returned 12% at the time. The bond is convertible into stock at a price of $30. The stock is now selling for $35. Assume no dividends. […]