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Suppose a two percent coupon, $1,000 face value10-year bond is convertible any time before it matures...

Suppose a two percent coupon, $1,000 face value10-year bond is convertible any time before it matures into 100 shares of stock. The stock that it may be converted into is currently selling for $12. What is the lowest price this bond could be selling for right now?

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Answer #1

Here answer is $1200

Calculated as

Lowest price of this bond = No. of shares to be received on conversion x market price of one share

= 100 x $12

= $1200 per bond

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