What is the maximum gain and loss on holding bond

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Nichole is holding a 8 year, RM1,000 par value with a 6% annual coupon convertible bond with a 6% required rate of return. The bond is convertible into 60 shares of stock. Each share is worth RM19. Besides that, Nichole is considering to purchase another 6 years corporate bond for investment purpose. A choice of terms such as call feature, convertible feature, warrants, sinking fund and debenture are available for her to select in investing to this bond.

Required:

Question (a) What is the current market value for her holding bond?

Question (b) What is the maximum gain and loss on her holding bond if the required rate of return do not change?

Question (c)If she would like to purchase another 6 years corporate bond, which of the terms as mentioned above is desirable? How does each feature affect the required rate of return for the bond?

Reference no: EM132593404

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