- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 28. Valuation and Analysis of Bonds with Embedded Options
- Subject 8. Valuation and Analysis of Convertible Bonds
CFA Practice Question
Which measure represents the premium investors effectively pay for the underlying shares if they buy the convertible bond and then convert it into shares?
B. market conversion premium per share
C. value of convertible bond - value of the straight bond
A. market conversion price
B. market conversion premium per share
C. value of convertible bond - value of the straight bond
Correct Answer: B
It allows investors to identify the premium when buying the convertible bond rather than the underlying common stock.
User Contributed Comments 1
| User | Comment |
|---|---|
| ALOA123 | The Price you are effectively paying is the market conversion price. The price OVER the current share price is the market conversion premium per share. |