Convertible Bonds. A 10-year maturity convertible bond with a 6 percent coupon on a company with a bond rating of AAA is selling for $ 1,050.Each bond can be exchanged for 20 shares, and the stock price currently is $50 per share. Other AAA-rated bonds with the same maturity would sell at a yield to maturity of 8 percent. What is the value of the implicit call option on the bond? Why is the bond selling for more than the value of the shares it can be convened into?
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