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Basic Question 8 of 10
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?
B. 8.19
C. 8.41
A. 6.76
B. 8.19
C. 8.41
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I used your notes and passed ... highly recommended!
Lauren
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.