Homework Answers
| a. | |
| Straight value = Interest * PVAF,17%,15year + Redemption value * PVF,17%,15year | |
| Straight value = (800*12%) * (1-(1+17%)^-15)/17% + 800 * 1/(1+17%)^15 | 587.03 |
| b. | |
| Conversion value = Market price of equity * Conversion ratio = 23 * 75 | 1725 |
| c. | |
| Minimum value of the bond = Higher of straight value / conversion value | 1725 |
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