What is a Convertible Bond?
w ALZA
Ë 5% Convertible 2006
Ë Convertible into 26.2 shares
Ë Conversion ratio 26.2
Ë Conversion price = 1000/26.2 = $38.17
Ë Market price of shares = $28
w Lower bound of value
Ë Bond value
Ë Conversion value = 26.2 x 28 = 733.60