Convertible bond Suppose A Company issues a five-year convertible bond with a $1,000 par value and a coupon of 8%. The conversion ratiothe number of shares that the investor receives if they exercise the conversion option is 1:25 The effective conversion price is $40 per share ($1,000 divided by 25).

Whats happen if stock price goes up to $60? Whats happen if stock price goes down to $25?