Web www.software-risk.co.uk

The extent by which the conversion price of a convertible security exceeds the prevailing common stock price at the time the convertible security is issued. In general usage, the conversion premium is the amount by which the convertible security trades above its conversted value. For example, if a $1,000 par bond is trading at $1,100, it is convertible into 50 shares, and the shares are trading at $21, the converted value is 50 X 20.50 = $1,025, and the conversion premium is $75.

Copyright © 2005, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

Related Articles
Premium
Hybrid security
Forced conversion
Fixed income equivalent
First preferred stock
Factor analysis
Exchangeable Security
Exchangeable instrument

Similar Areas

Finance Items

Selected Books

Keywords

Conversion premium

conversion

premium

convertible security

common stock