A 45 Percent,semi-Annual Coupon Bond Has a Face Value of $1,000

question 1

Multiple Choice

A 4.5 percent,semi-annual coupon bond has a face value of $1,000 and a time to maturity of 4 years.The bonds are convertible into shares of common stock at a conversion price of $42.50.The stock price currently is $40.70.Similar,non-convertible bonds have a yield to maturity of 4.5 percent.The intrinsic value of this bond is ________ and the conversion value is ________.

• A) $832.62; $982.80
• B) $961.06; $957.65
• C) $1,014.16; $1,017.50
• D) $1,014.16; $982.80
• E) $1,006.96; $1,017.50

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Definitions:

Collective Bargaining

A process of negotiation between employers and a group of employees aimed at reaching agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights.

Escalator Clauses

Provisions in a contract that allow for an automatic increase in wages or prices under certain conditions.

Productivity Increases

An improvement in the efficiency of production, often measured by the amount of output per unit of input over a period.

Labor Union Membership

The affiliation of individual workers to an organized labor union, which represents their interests in negotiating wages, benefits, and working conditions with employers.