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Price of the bond-callable convertible bond

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You have been hired to analyze a new 20-year Callable Convertible Bond. The bond pays a 6% coupon annually, and is selling at par. The conversion price is $150 and the stock is currently selling at $35. The bond is callable at $1,150, but analysts believe that the bond will not be called unless the conversion value reaches $1,250. The YTM of a 20-year non-callable, non-convertible bond is 8.5%.

(a) What would be the price of the bond if it did not have the call and conversion features?

Reference no: EM132998953

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