Question: A Merrill Lynch note structure called a liquid yield option note (LYON) is a zero-coupon instrument that is convertible into the common stock of the

A Merrill Lynch note structure called a liquid yield option note (LYON) is a zero-coupon instrument that is convertible into the of the issuer. The conversion ratio is fixed for the entire life of the note. If investors wish to convert to the shares of the issuer, they must exchange the LYON for the stock. As a result, the conversion price increases over time. Why?

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