Should anita convert her investment to stock

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Problem 1: Anita has considered investing in bonds of Arenflo, a very successful company. The bonds were issued 5 years ago at par value of $1,000 and have 25 years to maturity. They have a coupon rate of 8% per annum, and the Market Yield is 6%. They are convertible to 50 shares of common stock and redeemable at any time at $1,080. If the common stock rises in price to $30 per share, is it in the company's best interest to redeem the bond at $1,080 or should Anita convert her investment to stock?

a) Anita should not even think about it, it is better to convert to shares because she will have more profit.

b) Anita should not do anything, she should stay as she is because she will earn more with the bond.

c) Anita, look elsewhere for help

Reference no: EM132944528

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