4. A convertible bond has a face value of $1,000 and the conversion price is $50

Question

4. A convertible bond has a face value of $1,000 and the conversion price is $50 per share. The stock is selling at $30 per share. The bond pays $65 per year in interest and is selling in the market for $950. It matures in 7 years. Market rates are 10% annually. (I) What is the conversion ratio? (II) What is the conversion value? 5. If a $100,000 Treasury bond futures contract changes by 5/32, what is the dollar change? 6. A mutual fund is set up to charge a load. Its net asset value is $17.70 and its offer price is $18.60. What is the dollar value of the load (commission)?

Explanation / Answer

If a $100,000 Treasury bond futures contract changes by 5/32, what is the dollar change

100,000 x 1 9/32 = 1.28%

$1281.25

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