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Basic Question 7 of 10
Which measure represents the premium investors effectively pay for the underlying shares if they buy the convertible bond and then convert it into shares?
B. market conversion premium per share
C. value of convertible bond - value of the straight bond
A. market conversion price
B. market conversion premium per share
C. value of convertible bond - value of the straight bond
User Contributed Comments 1
| User | Comment |
|---|---|
| ALOA123 | The Price you are effectively paying is the market conversion price. The price OVER the current share price is the market conversion premium per share. |
Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh
Learning Outcome Statements
describe defining features of a convertible bond;
calculate and interpret the components of a convertible bond's value;
describe how a convertible bond is valued in an arbitrage-free framework;
compare the risk-return characteristics of a convertible bond with the risk-return characteristics of a straight bond and of the underlying common stock.
CFA® 2025 Level II Curriculum, Volume 4, Module 28.