Exercise 27.3.6 Like warrants, CBs can be converted into newly issued shares; they are in fact equivalent under certain assumptions (see Exercise 11.1.10, part (2)). On a per-share basis, the conversion price plus the final coupon payment acts very much like the strike price. But unlike with warrants, exercising the conversion option does not require paying the “strike price.” Derive the pricing relation between European warrants and CBs with a European-style conversion option. Assume that the issuer pays no dividends and ignore the dilution issue.