Zippy Corporation just sold $30million of convertible bonds with a conversion ratio of 40. Each$1,000 bond is convertible into 25 shares of Zippy’s stock.
a. What is the conversion price ofZippy’s stock?
b. If the current price of Zippy’s stock is $15 and theCompany’s annual stock return is normally distributed with astandard deviation of $5, what is the probability that investorswill find it attractive to convert the bond into Zippy stock in thenext year?
Kindly write the answer in MS words..
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