CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

Consider the following convertible bond:

Par value: $1,000
Coupon rate: 6%
Conversion ratio: 20
Market price: 1050
Straight value: 980

Underlying stock characteristics:
Current market price: $40 per share
Dividend yield: 4%

The market conversion price is:
A. 52.5
B. 40
C. 49
Explanation: The market conversion price = market price of the bond / conversion ratio = 1050 / 20 = 52.5

User Contributed Comments 3

User Comment
americade your b/e point for stock prc
danlan2 market price/conversion ratio, use the market price and not the par value.
xiaoniu Conversion price: the applicable share price at which the bondholders can convert their bonds into common shares.
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