Break even calculations
= conversion premium / (convertible yield – stock yield)
= 21.21 / (7.00 – 1.67) = 3.98 (years)
This represents the number of years necessary for the stock
investor to recover the conversion premium (extra cost of
buying the convertible rather than the stock) from the
convertible’s higher income relative to an instrument of an
equivalent amount in the stock.
After 3.98 years, the convertible has made up, in income alone, the amount of the conversion premium.