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  3. a 12-year maturity convertible bond with a 5% annu

A 12-year maturity convertible bond with a 5% annual coupon on a company with a...

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Finance

A 12-year maturity convertible bond with a 5% annual coupon on a company with a bond rating of AAA is selling for $1,088. Each bond can be exchanged for 25 shares, and the stock price currently is $40 per share. Other AAA-rated bonds with the same maturity would sell at a yield to maturity of 9%. What is the value of the implicit call option on the bond ?

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