Basic convertible bonds calculations
嚜濁asic convertible bonds calculations
stock price
stock dividend
convertible market price
coupon rate
maturity
conversion price
$30.00 per share
$0.50 per share
$1,000
7.00%
20 years
$36.37
Stock dividend yield = annual dividend rate
/ current stock price
= $0.50 / $30.00 = 1.67%
1
Conversion ratio
= number of shares for which one bond may be
exchanged
= par / conversion price
= $1,000 / $36.37 = 27.50 shares
Conversion value
= equity value or stock value of the convertible
= stock price x conversion ratio
= $30.00 x 27.50 = $825.00
2
Premium for call right
? An investor who purchases a convertible bond
rather than the underlying stock typically pays a
premium over the current market price of the stock.
? Why would someone be willing to pay a premium
to buy this stock? The market conversion premium
per share is related to the price of a call option 每
limit the downside risk of the convertible bond.
3
Conversion premium
= (convertible price 每 conversion value)
/ conversion value
= ($1,000 每 $825.00) / $825.00 = 21.21%
Dollar premium
= convertible price 每 conversion value (expressed
in points)
= ($1,000 每 $825.00) / $1,000 x 100%
= 17.50 points
4
Conversion premium
In a bullish environment, the enthusiasm of the market
boosts conversion premium levels.
y National Semiconductor Corporation (Sept 1995) 每
coupon rate 6.5 percent and conversion premium of
45 percent.
y 3Com Corporation (Nov., 1994) 每 coupon rate
10.25 percent and conversion premium of 70
percent. Bondholders are compensated with a high
coupon rate while they wait for the stock price to
rise.
5
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related download
- bond mathematics valuation suite llc
- calculate the total return of a bond retail investor org
- annex 6 important excel functions for bond related calculations
- how to calculate yield to call on a bond in excel
- s p capital iq s excel plug in v 8 x frequently used formulas
- price yield and rate calculations for a treasury bill calculate the
- basic convertible bonds calculations
- bond valuation using excel professor cesario mateus
- bond valuation spreadsheetml
- formula method excel eastern michigan university
Related searches
- aston martin convertible for sale
- aston martin db9 convertible for sale
- jaguar xj convertible for sale
- xjs convertible for sale
- aston martin convertible db9
- aston martin db9 convertible price
- 1940 lincoln convertible for sale
- 1940 lincoln zephyr convertible coupe
- convertible tops direct
- used jag convertible for sale
- jaguar convertible for sale
- jaguar xk convertible for sale