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Calculate the duration would take for the bond conversion

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Reference no: EM132891176

Pcorp Bhd has just issued a 30-year callable convertible bond wit a coupon rate of 6 percent annual coupon payments. The bond has a conversion price RM93. The company's stock is selling for RM28 per share. The owner of the bond will be forced to convert if the bond's conversion value is ever greater than or equal to RM1,100. The required return on an otherwise identical nonconvertible bonds is 7 percent.

Problem (a) Calculate the conversation ratio and minimum value of the bond.

Problem (b) Calculate the duration would take for the bond's conversion value to exceed RM1,100 if the stock price were to grow by 11 percent per year forever.

Reference no: EM132891176

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