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The straight value of a convertible bond is nothing but the value of a non-convertible bond having same characteristics. For example, assume that a company has two types of bond issues outstanding in the market having a same coupon rate: a convertible bond issue and a non-convertible bond issue. The market price of the convertible and non-convertible bonds is Rs.190 and Rs.150 respectively. Thus, the straight value of the convertible bond is Rs.150. Investors are willing to pay a premium of Rs.40 - the privilege of being able to convert the bond into common shares.
Illustrate the term quality of benefits It is clear from Table that total returns associated with two alternatives are identical in a normal situation but range of variati
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Monte-Carlo Simulation Let us, for a shortwhile, leave the illustration for determining the price and consider a simpler illustration for understanding the Monte-Carlo method
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