Herring Inc. is considering issuing 18-year, 9.0% semiannual coupon, $1,000 face value convertible bonds at a price of $1,000 each. Each bond would be convertible into 25 shares of common stock. If the bonds were not convertible, investors would require an annual nominal yield of 11.8%. What is the straight-debt value of each bond at the time of issue? Do not round your intermediate calculations.
A. $911.77
B. $713.56
C. $753.20
D. $792.84
E. $951.41
Answer: D
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