A. 2.04%
B. $2.04
C. $280
D. $820
✅ The correct answer is option C.
Rate of return on convertible bond = Value of conversion option to bond holder – Rate of return on non-convertible bond
= $550 – $270 = $280.
Rate of return on convertible bond = Value of conversion option to bond holder – Rate of return on non-convertible bond
= $550 – $270 = $280.