Hi all,
On page 34, first paragraph of CFA text (volume 5) it says that the conversion price = stock price x conversion ratio. I’m assumign this is incorrect and should be:
conversion price = stock price / conversion ratio ?
blue box 7 then does a question and it seems like it’s this second form. thanks anybody.
I submitted the enquiry to the CFA curriculum team but without a response. I would advise you to submit a complain/enquiry as well.
They’re being a little sloppy in their language.
The first reference (white text) is to the bond’s conversion price, which they say is the stock’s price times the conversion ratio. That’s OK.
The second reference (blue box) is to the stock’s conversion price, which they say is the bond’s price divided by the conversion ratio. That’s also OK, though a bit unusual; it’s usually called the strike price.