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What would be profit on investment in convertible bonds

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Reference no: EM132869523

Question 1: A zero coupon bond is sold with a face value of $5000. It has a life of 20 years. It has a required rate of return of 12.5%. What will be the price today?

Question 2: You buy a convertible bond for $1000 and it has a conversion ratio of 50. Six years later, the stock of the firm is selling for $35 per share. If you were to convert your bond into stock and sell those shares in the stock market for $35 per share, what would be your profit on your investment in convertible bonds?

A. $450 B. $1140 C. $920 D. $750

Reference no: EM132869523

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