A convertible bond is currently selling for $1,125. It is convertible into 20 shares of common which presently sell for $40 per share. The conversion premium is

Name: A convertible bond is currently selling for $1,125. It is convertible into 20 shares of common which presently sell for $40 per share. The conversion premium is
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Question

Quizplus · Accepted Answer

The conversion value of the bond is 20 shares * $40 = $800. The conversion premium is the difference between the bond's price and its conversion value: $1,125 - $800 = $325.

A Convertible Bond Is Currently Selling for $1,125