13. Continuing with the numerical illustration, assuming that the stock price of the underlying share to be $45.00 per share, and the initial conversion premium of 25%, the initial conversion price is = $45.00 × 1.25 = $56.25 per share. The conversion ratio per bond accreting at 5% and 20 year maturity will be the issue price divided by the initial conversion price = (372.43/56.25) = 6.621 shares. In five years, the bond will accrete to $476.74, which is the issue price compounded at 2.5% for 10 semiannual periods. The effective conversion price will then be = (476.74/6.621 shares) = $72.00 per share. In options terminology, these bonds have strike prices increasing with time.

14. The puts are sequential European puts, also known as Bermudan puts; they can be either hard puts or soft puts. In the former, upon exercise of the put, the investor is paid the put amount in cash. In the latter, it can be satisfied in cash or shares equal to the value of the put amount, or combination, at the option of the issuer. Earlier versions had an equal value of a new straight debt security as a third alternative; this alternative has been dropped due to ambiguities regarding the valuation of the new debt security.