CONVERTS
10-year convertible bond
Stock price is 15
Converts into 50 shares
What is strike?
Option value is $2.00 per share
What is total option value?
Regular bond rate is 5%, s.a.
What is bond value to price convert at par?
What is coupon?
How much option value do you need if coupon drops to 1%?
Would strike be higher or lower?
Would conversion ratio be higher or lower?
If option value is $4 per share, how many options do you need?
Then how many strike?