Watford - I did not include the dividend. My original assumption...

Watford - I did not include the dividend. My original assumption was that it was calculated on current value rather than face value and that is would be small enough to effectively be ignored, especially since they do not have to pay it and it will be Sept 09 before a conversion can be triggered through nonpayment of dividend.

I'm taking a closer look at you numbers and fear something isn't quite right - either me or the numbers, I'm not sure.

Take the last example of TIM = 15 cents in Sept09 and TIMPB at 90 cents.

You convert in September09 and recieve tha maximum 4 TIM shares 4*15 = 60 cents of TIM shares.

Along the way you collect a full year's dividend of 13.5 cents (2.00*6.75%)

That gives you a total of 73.5 cents in September 2009, for which you paid 90 cents today. The rate of return is not 10.5%, but closer to -20%.

Am I really missing something here?