The following data apply to Saunders Corporation’s convertible bonds
The following data apply to Saunders Corporation’s convertible bonds.
Maturity 10 Stock price $30.00
Par value $1,000 Conversion price $50.00
Annual coupon 7.00% Straight-debt yield 8.00%
Based on your answers to the three preceding questions, what is the minimum price (or “floor” price) at which the Saunders’ bonds should sell?
Suppose the March CBT Treasury bond futures contract has a quoted price of 88-30. If annual interest rates go down by 3.75 percentage point, what is the gain or loss on the futures contract? (Assume a $1,000 par value, round the new interest rate to 4 decimal places when written as a decimal, and round the change in price up to the nearest whole dollar.)
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