- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 30. Valuation and Analysis of Bonds with Embedded Options
- Subject 8. Valuation and Analysis of Convertible Bonds
CFA Practice Question
Consider the following convertible bond:
Coupon rate: 6%
Conversion ratio: 20
Market price: 1050
Straight value: 980
Dividend yield: 4%
Par value: $1,000
Coupon rate: 6%
Conversion ratio: 20
Market price: 1050
Straight value: 980
Underlying stock characteristics:
Current market price: $50 per share
Dividend yield: 4%
The market conversion premium per share is:
A. $2.5
B. $3
C. $4.5
Explanation: Market conversion price = $1050/20 = $52.5
Market conversion premium per share = $52.5 - 50 = $2.5
Market conversion premium per share = $52.5 - 50 = $2.5
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