Hi, I just wanted to know if this an error or if I am wrong but this is one of the most intriguing calculation I have even seen. Page 104 we have: Face value 1000 Conversion ratio 9 Price of the stock in the market 92 The bond is currently trading at 88% of it’s face value. The find a conversion premium of 34%… (???) It seems that they do (face value / C .R) / (C. R * stock price in the market) What the ??? I think the calculation for the conversion premium is (price of the bond in the market - parity) /parity Therefore it should be (88 - 82.8) / 82.8 = 6.28 Ps; parité = (C.R * stock price) * 100 / 1000 = 82.8 What do you guys think ? I seat tomorrow 1PM GMT+1
Wow nobody can help ???
hey, I didnt read the text you referred. but i agreed with your logic.
taking your test soon?
mine in 6 hours. good luck.
Conversion Premium = (Conversion Price - Parity) / Parity
Conversion Price = Par Value / Conversion Ratio = 1000 / 9 = 111.11 (repeating)
Conversion Premium = (111.11 - 82.8) / 82.8 = 34.19%
Conversion Premium = (Convertible price - Parity ) / Parity = 880 / 828 - 1 = 6.28%
Hello,
Janetliu, looking at the time it is now you already seated, I really hope you get it ! I do agree with your logic as well…
The page is 107 question 3 here: https://caia.org/sites/default/files/curriculum-download/March-2014-LevelII-Workbook.pdf
lilJamieDimon, you calculation seems to be the one used in the workbook but not it the main book where they use the (Convertible price - Parity ) / Parity calculation…
I seat in 5 hours 
FYI - The formulas I posted were from the Schweser Secret Sauce.
Good luck to all!
Ok thanks… Anyway it was not in the exam and I feel quite confident about it 