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Technology Stocks : Apple Inc.

AAPL 278.06

-0.2%

Dec 11 3:59 PM EST

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To: Phillip C. Lee who wrote (9455)	3/14/1998 12:33:00 PM
From: Ludo	Read Replies (2) of 213176

>Those who depend on bonds interest to meet their daily need won't >convert since they can not afford to lose the stable income generated >from bonds and they probably don't have stomachs to weather the >storms from stock. Not at 28, but yes at a higher price. I don't remember the exact expiration of those bonds, but let's say in 4 years, at 8%. This would give them a total return of 32% (without reinvesting the interest for the first payments). If the stock price reach 28*1.32 = 37 $, they could sell "covered" calls at 37 and get called at this strike price. They would have their full money right now without any risk, since they can let it in any government bond with no risk at all. The real strike price would be much lower than that since the other bonds would give at least 4-5% and the call premium would also lower the effective "conversion price". I don't have the time to make the full math here with those numbers, but I would say that a share price of 32 is just what is needed for a fully unrisky conversion (including the replacement bond interest and call premium). Ludo

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