The conversion premium is defined as which of the following?
A)The number of shares that a convertible security can be exchanged for.
B)The price at which a convertible security can be converted into common shares.
C)The value of a convertible security if it is immediately converted into common shares.
D)The percentage difference between the value at which the bonds are trading and their conversion value.

Question

Quizplus · Accepted Answer

The conversion premium is the percentage difference between the market value at which the convertible security is trading and its conversion value. It represents the extra cost paid by investors for the privilege of holding a security with the option to convert it into common shares in the future. Therefore, the correct choice is D.

The Conversion Premium Is Defined as Which of the Following