1. Given that a bond matures in 5 years with a coupon of 7% paid semi-annually and a yield to maturity of 9%, the current market price should be closest to __________.
a. $1000.00
b. $870.63
c. $1,841.75
d. $920.87
2. Assume that the current stock price is $25 per share, the exercise price is $26 per share, the risk-free rate is 2.00%, time to expiration is 9 months and the standard deviation of the underlying stock price is 20%. The current call option price should be closest to:
a. $1.00
b. $1.46
c. $2.07
d. $0
3. The common stock of Bike Tours, Inc. pays no dividend, and has a market price of $80 per share. Bike Tours' 8% ($80 annual coupon) convertible bond sells at 128% of the par value ($1280), and is convertible into common at a stock price of $100 per share. The conversion premium for Bike Tours' convertible bond is __________.
a. $1000
b. $800
c. $280
d. $480