1) A convertible bond has the following features:
|
Coupon
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7.25%
|
|
Maturity
|
June 15, 2020
|
|
Market price of bond
|
$83.00
|
|
Market price of underlying common stock
|
$38.00
|
|
Annual dividend
|
$1.20
|
|
Conversion ratio
|
18.50 shares
|
Calculate the conversion premium for this bond.
2) Find the duration of a 6% coupon bond making annual coupon payments if it has two years until maturity and a yield to maturity of 7%.