Conversion price $52/share Coupon rate 6.5% Par value $1,000 Yield on nonconvertible bond of same quality 8.5% Maturity 25 years Market price of stock $42 /share
If the price of the convertible bond is $900, what is the value of the call option embedded in the convertible bond?
If you buy the convertible bond, are you willing to convert it now? Why or why not? Please explain.