Conversion Premium Calculator

✖Conversion Value is the amount an investor would receive if a convertible security were changed into common stock.ⓘ Conversion Value [CV]			+10% -10%
✖Market Price of Convertible Bond is how much someone will pay for the bond on the free market.ⓘ Market Price of Convertible Bond [MP_CB]			+10% -10%

✖Conversion Premium is an amount by which the price of a convertible security exceeds the current market value of the common stock into which it may be converted.ⓘ Conversion Premium [CP]

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Formula

✖

Conversion Premium

Formula

`"CP" = "CV"-"MP"_{"CB"}`

Example

`"5"="100"-"95"`

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Conversion Premium Solution

STEP 0: Pre-Calculation Summary

Formula Used

Conversion Premium = Conversion Value-Market Price of Convertible Bond
CP = CV-MP_CB
This formula uses 3 Variables

Variables Used

Conversion Premium - Conversion Premium is an amount by which the price of a convertible security exceeds the current market value of the common stock into which it may be converted.
Conversion Value - Conversion Value is the amount an investor would receive if a convertible security were changed into common stock.
Market Price of Convertible Bond - Market Price of Convertible Bond is how much someone will pay for the bond on the free market.

STEP 1: Convert Input(s) to Base Unit

Conversion Value: 100 --> No Conversion Required
Market Price of Convertible Bond: 95 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

CP = CV-MP_CB --> 100-95

Evaluating ... ...

CP = 5

STEP 3: Convert Result to Output's Unit

5 --> No Conversion Required

FINAL ANSWER

5 <-- Conversion Premium

(Calculation completed in 00.004 seconds)

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Credits

Created by Keerthika Bathula

Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad

Keerthika Bathula has created this Calculator and 50+ more calculators!

Verified by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

Vishnu K has verified this Calculator and 200+ more calculators!

< 14 Fixed Income Securities Calculators

Accrued Interest

Go Accrued Interest = (Face Value*Total Annual Coupon Rate*Days since Last Payment Date)/(Number of Coupon Payments per Year*Accrual Period)

Conversion Premium

Go Conversion Premium = Conversion Value-Market Price of Convertible Bond

Conversion Ratio

Go Conversion Ratio = Par Value at Maturity/Conversion Price of Equity

Convexity Adjustment

Go Convexity Adjustment = Bond's Convexity*(Change of Yield^2)*100

Callable Bond Price

Go Callable Bond Price = Non Callable Bond Price-Call Option Price

Nominal Yield

Go Nominal Yield = (Total Annual Interest Payments/Face Value)*100

Expected Loss

Go Expected Loss = Default Probability*Loss Severity given Default

Putable Bond Price

Go Putable Bond Price = Non Putable Bond Price+Put Option Price

Conversion Value

Go Conversion Value = Market Price per Share*Conversion Ratio

Floating Interest Rate

Go Floating Interest Rate = Reference Rate+Fixed Spread

Dirty Price

Go Dirty Price = Clean Price+Accrued Interest

Clean Price

Go Clean Price = Dirty Price-Accrued Interest

Semi Annual Bond Equivalent Yield

Go Semi Annual Bond Equivalent Yield = Yield per Semi Annual Period*2

Loss Severity

Go Loss severity = 1-Recovery Rate

Conversion Premium Formula

Conversion Premium = Conversion Value-Market Price of Convertible Bond
CP = CV-MP_CB

What is Conversion Premium?

Conversion premium is essential for investors looking to maximize returns with convertible bonds. The conversion premium represents the additional cost an investor pays for the potential upside of converting the bond into equity. By understanding how to calculate this premium, investors can make informed decisions about the attractiveness of a convertible bond.
The conversion premium is calculated by subtracting the current market price of the convertible bond from the conversion value per bond. The conversion value per bond is determined by multiplying the conversion ratio by the current market price of the underlying equity.

How to Calculate Conversion Premium?

Conversion Premium calculator uses Conversion Premium = Conversion Value-Market Price of Convertible Bond to calculate the Conversion Premium, The Conversion Premium is the premium the bondholder will have over the conversion value. Conversion Premium is denoted by CP symbol.

How to calculate Conversion Premium using this online calculator? To use this online calculator for Conversion Premium, enter Conversion Value (CV) & Market Price of Convertible Bond (MP_CB) and hit the calculate button. Here is how the Conversion Premium calculation can be explained with given input values -> 5 = 100-95.

FAQ

What is Conversion Premium?

The Conversion Premium is the premium the bondholder will have over the conversion value and is represented as CP = CV-MP_CB or Conversion Premium = Conversion Value-Market Price of Convertible Bond. Conversion Value is the amount an investor would receive if a convertible security were changed into common stock & Market Price of Convertible Bond is how much someone will pay for the bond on the free market.

How to calculate Conversion Premium?

The Conversion Premium is the premium the bondholder will have over the conversion value is calculated using Conversion Premium = Conversion Value-Market Price of Convertible Bond. To calculate Conversion Premium, you need Conversion Value (CV) & Market Price of Convertible Bond (MP_CB). With our tool, you need to enter the respective value for Conversion Value & Market Price of Convertible Bond and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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