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Premium for bike tours convertible bond

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Reference no: EM132054538

1. The common stock of Bike Tours, Inc. pays no dividend, and has a market price of $80 per share. Bike Tours' 8% ($80 annual coupon) convertible bond sells at 128% of the par value ($1280), and is convertible into common at a stock price of $100 per share. The conversion premium for Bike Tours' convertible bond is __________.

a. $480

b. $280

c. $1000

d. $800

2. A more accurate measure of the change in bond price due to changes in yield to maturity can be found using both modified duration and __________.

a. time to maturity

b. Macaulay duration

c. convexity

d. conversion premium

Reference no: EM132054538

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