A comvertbole secunty (usually comverbble bonds or convertible preferred stock) may be tendered at the option of the holder for sthares of common stock in the issuing firm. In other words, the bonds or preferred stock may be converted to common stock. When warrants are exercised, new shares are issued, of treasury stock the company has previously purchased is provided to the wartant holder. When convertbles are exercised: new capital is provided to the issuer. debt is replaced by common stock on the balance sheet. Consider the case of Cheung Zap Inci? Cheung Zap inc. just issued five-year convertible bonds at a par value of $1,000, At any time before matunty, investors have the option to exchange their bonds for thares of cheung's common stock at a conversion price of 552.30. Cheung's convertible bonds pay a 6.60% annual coupon, but if Cheung had issued straight-debt bonds (no conversion), if would have had to pay 11.00% annual interest. Based on the information ovariable, complote the table! Based on the information avaltable. complefe the table: Cheing's common stock currently sells for $39 per share. Would an investor want to corlyert the bonds now? Suppose analysts expect Cheung to pay a dividend of $2.50 per share at the end of the year and for the dividend to grow at a constant rate of 5.5% per year. What is the expected conversion value five years from now? 5965.37 per share 31.44a.06 per share 5724.03 per share \$2,691,22 per share