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11 Cards in this Set
- Front
- Back
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Name three reasons why investors pay premium.
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1. safety
2. higher income 3. equity kicker |
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Conversion value formula
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Conversion ratio * Stock price
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Conversion Premium formula ($)
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Bond market price - Conversion value
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Conversion premium formula (%)
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Conversion premium($) / Conversion value
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Conversion equivalent formula
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Bond market price / Conversion ratio
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payback period formula
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Conversion premium ($) / interest - annual dividend
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Annual dividend formula
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Conversion ratio * Dividend ($)
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2 disadvantages of convertible bonds
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1. not as much yield as straight bonds
2. pay premium |
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stock value =
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conversion value
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When finding the bond value, what does the I represent?
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the current market rate
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When finding the bond value, what does the pmt represent?
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interest
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