Calculate the total return in dollars

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Question

You bought an XYZ corp $1,000, 5% convertible bond for $1,000. It has a conversion feature allowing you to convert the bond into 50 shares of XYZ common stock.

(a) At what stock price would converting the bonds into stock result in a break even trade?

(b) One year from now, the stock price is $25. Convert the bond, sell the stock at $25, add in the bond interest, and calculate the total return in dollars and as a yield of the original $1,000 investment.

Reference no: EM132634895

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