Problem:
The following data refers to the McDonald's issue of convertible bonds:
• Maturity: 10 years
• Stock price: $30.00
• Par value: $1,000.00
• Conversion price: $35.00
• Annual coupon: 5.00%
• Straight-debt yield: 8.00%
Required:
Question 1: What is the bond's conversion ratio?
Question 2: What is the bond's conversion value at t=0, assuming no growth?
Question 3: What is the bond's straight debt value?
Question 4: What is the minimum price (or "floor" price) at which the bonds should sell?
Note: Please show basic calculation