| Convertible Bonds |
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| § | Bondholders
get the option to exchange each |
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| bond
for a specified number of shares of |
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| stock
for each bond (conversion
ratio). |
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| Example: |
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| Bond
selling at 990; convertible into 40 shares. |
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| Current
share price = $20; value of converted |
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| shares
= $800 (conversion
value) -- |
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| conversion
suboptimal |
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| Conversion premium = $990 - 800 = $190. |
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