Problem:
Eastern Digital Corp has a convertible bond outstanding with a coupon rate of 9% and a maturity date of 20 years. The market rate of interest on bonds of the same risk class carry a 10% return. The conversion ratio is 40. The company's common stock is selling for $18.25 per share. The bond is selling for $970.
Required:
Question 1: What is the conversion value?
Question 2: What is the conversion premium?
Note: Please show guided help with steps and answer.