What is a conversion ratio? A conversion price? A straight-bond value?

Jump to Solution
Category:

What is a conversion ratio? A conversion price? A straight-bond value?

0
0

What is a conversion ratio? A conversion price? A straight-bond value?

Explanation & AnswerSolution by a verified expert

Explanation

A convertible security with par value or issue price of 100 and with an option to convert to common shares at a conversion price of 20 is said to have a conversion ratio of 5 (100/20).
The par value or issue price of a convertible security divided by the conversion ratio equals the conversion price.
The straight-bond value of the convertible bond is the discounted value of principal and interest payments using the effective rate of a similar security without the conversion feature.

Verified Answer

The quantity of common shares that will be received from conversion of convertible bonds or convertible preferred shares
The price at which the common shares are effectively bought when purchased through a convertible security
The value of a convertible bond without the conversion feature

Purchase this answer to view it. $5
Login/Sign up for free, load your wallet instantly using PayPal or cards and purchase this solution to view it.

Looking for the solution to this or another homework question?

If you need essay writing assistance or homework solutions, log in or sign up for a free account and ask our writers any homework question.