CFA Practice Question

There are 490 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 conversion value of the bond is ______.
Correct Answer: $800

The conversion value is the value of the 20 stocks that the bond can be converted into: 20 x $40 = $800.

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