The bonds are currently selling at conversion premium

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Reference no: EM131333704

Vernon Glass Company has $10 million in 10 percent convertible bonds outstanding. The conversion ratio is 40, the stock price is $21, and the bond matures in 10 years. The bonds are currently selling at a conversion premium of $60 over their conversion value.

If the price of the common stock rises to $27 on this date next year, what would your rate of return be if you bought a convertible bond today and sold it in one year? Assume on this date next year, the conversion premium has shrunk from $60 to $25. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Reference no: EM131333704

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