What is the implied strike price for the convertible bond

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A semiannual convertible bond is selling at par = 1,000. The bond has a quoted annual coupon of 12% and 15 year to maturity. The conversion ratio on the bond is 30. The current stock price for the firm that has issued the bond is $20.00. A bond with similar default risk and maturity to the aforementioned convertible bond has a six-month ytm of 7%. a. What is the implied strike price for the convertible bond? b. What is the value of the option to convert? c. What is the implied Premium on a per share basis? d. What is the impled leverage? e. Why is the leverage so high relative to that for the “typical” exchange traded option that is out of the money? 2.

Reference no: EM131545149

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