To understand the investment banker's choice of conversion premium and coupon rate in properly pricing a convertible bond. To see that the convertible is a fairly straightforward application of the Black-Scholes option pricing model. To understand the concept of valuing a convertible as the sum of a straight bond plus the conversion option. To introduce students to the concept of matching a company's business risk with the type of financing: equity, debt, or convertible debt. To show the compatibility of a convertible bond as a source of funds for a company's share repurchase plan.