Sometimes companies find it desirable to include a convertibility option to sell bonds at a reasonable interest

Question:

Sometimes companies find it desirable to include a convertibility option to sell bonds at a reasonable interest rate. Siemens AG, the huge German electronics company, issued €2.5 billion of convertible bonds some years ago with a rate of 1.375%, which is less interest than Siemens would have paid if the bonds were not convertible. Each €1,000 bond is convertible into 17.8 common shares of Siemens stock.
In 2011, Siemens had revenues of more than €74 billion and a net income of over €6.3 billion.
The company pays dividends of €3.00 per share.
1. Compute the annual interest received by the holders of the convertible bonds.
2. The current price of one share of Siemens in June 2012 was €65.70. If you held some of the Siemens convertible bonds, would you immediately convert your bonds to ? Why or why not?
3. Suppose the date of the convertible bonds was rapidly approaching. Would you convert your holdings of the convertible bonds if the price of Siemens stock were only €62 per share? If the price were €50 per share? Explain.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...