22. A convertible bond has the following features: Coupon: 6.5% Maturity date: 10 years Exercise...
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22. A convertible bond has the following features: Coupon: 6.5% Maturity date: 10 years Exercise price: $20 Principal: $1,000 Call price: $1,065 Convertible preferred stock: Annual dividend $2.25 Convertible into 2.5 shares of common stock Callable at $25 a share Currently the common stock is selling for $13; the yield on non-convertible bonds is 10%, and the yield on comparable preferred stocks is 14%. What is the value of the above securities in terms of the common stock? What would be the value of each security if it lacked the conversion feature
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