1) Consider that company X issued convertible bonds with a nominal value of EUR 1000, currently quoted in the market at

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1) Consider that company X issued convertible
bonds with a nominal value of EUR 1000, currently quoted in the
market at EUR 950, which may be converted in 100 common shares at
any time after issue. The coupon rate is 7%, with coupons paid once
every year. That bond matures in 10 years time. Considering its
level of credit risk, the yield to maturity applicable to that bond
is 12%. At this moment, the market quote for the respective common
shares is EUR 7, whereas their quote was 9 at the time of issue.
Considering these conditions, answer the following questions:
a) Calculate the conversion value of this bond.
b) Calculate the conversion price.
c) Calculate the conversion premium for those that buy in the
secondary market.
d) Explain whether the bond is currently in-the-money,
out-of-the-money or at-the money