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# Convertible Calculations

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You have been hired to value a new 25-year callable, convertible bond. The bond has a 6.80 percent coupon rate, payable annually. The conversion price is \$150, and the stock currently sells for \$44.75. The stock price is expected to grow at 12 percent per year. The bond is callable at \$1,200; but based on prior experience, it won't be called unless the conversion value is \$1,300. The required return on this bond is 10 percent. What value would you assign to this bond?

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#### Solution Preview

Convertible Calculations
You have been hired to value a new 25-year callable, convertible bond. The bond has a 6.80 percent coupon rate, payable annually. The conversion price is \$150, and the stock currently sells for \$44.75. The stock price is expected to grow at 12 percent per year. The bond is ...

#### Solution Summary

This solution explains all of the steps for assigning value to a bond.

\$2.19