Compute the YTM for the Norfolk Southern bonds.Compute the YTM for Cephalon bonds.For Cephalon’s convertible bonds draw a “payoff diagram.

1.Compute the YTM for the Norfolk Southern bonds.

2.Compute the YTM for Cephalon bonds.

3.For Cephalon’s convertible bonds draw a “payoff diagram.” That is, graph the value of a single $1000 note on May 1, 2014, as a function of Cephalon’s stock price on the same day, assuming that the note has not been converted by then. How does the ownership position of a convertible bond holder differ from that of a conventional bond holder or a common shareholder?

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