Determining the floor value of bond

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A convertible bond pays interest annually at a coupon rate of 4% on a par value of $1,000. The bond has 10 years maturity remaining and the discount rate on otherwise identical non-convertible debt is 6%. The bond is convertible into shares of common stock at a conversion price of $26 per share (i.e. the bond is exchangeable for 40 shares). Today's closing stock price was $25. What is the floor value of this bond?

Reference no: EM132417250

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