- CFA Exams
- CFA Level I Exam
- Study Session 13. Fixed Income (2)
- Reading 34. 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
Current market price: $40 per share
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: $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. |