= $350 [u] Prob = 15% Assignment IV 1. Brown Enterprise issued a Convertible bond 4 years ago with one year left and the

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350 U Prob 15 Assignment Iv 1 Brown Enterprise Issued A Convertible Bond 4 Years Ago With One Year Left And The 1 (63.01 KiB) Viewed 36 times

= $350 Prob = 15% Assignment IV 1. Brown Enterprise issued a Convertible bond 4 years ago with one year left and the bond pays no coupon • Face value = $100 Share price Coupon = 6.5% per annum • Conversion ratio = 0.5 Continuous interest rate (r) = 3% $225 [m] • The current share price is $250 $250 Put price (K) = face value Recovery rate = 30% • 4 states of stock price in the next 1 year of u = 15%, d = 15% m = 68% and default = 2% $0 [Default] Which action the bondholder should do? Show your work! Prob = 68% Prob = 15% = Prob = 2% $125 [d] =