CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

A 10-year, 8% coupon convertible bond is currently trading at 97.50. The conversion price of the bond is 57.14. The underlying common stock of the same issuer is currently paying a dividend of $1.65 and is priced at 48.95. Which of the following would best estimate the market conversion premium per share?

A. 6.76
B. 8.19
C. 8.41
Correct Answer: A

Conversion ratio: 1000/57.14 = 17.5. Market conversion price = $975/17.5 = $55.71. Market conversion premium = 55.71 - 48.95 = 6.76.

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