If the par value of bond is $1000, market value be $1060 and conversion ratio be 18 then the conversion price be $55.55.
Given that par value of bond is $1000, market value be $1060 and conversion ratio be 18.
We are required to find the conversion price of the bond.
A bond is basically a type of security under which the issuer owes the holder a debt, and is obliged – depending on the terms – to repay the principal of the bond at the maturity date as well as interest over a specified amount of time.
The conversion price of the convertible security is basically the price of the bond divided by the conversion ratio.
Conversion price=Par value of bond/Conversion ratio
=1000/18
=$55.55.
Hence if the par value of bond is $1000, market value be $1060 and conversion ratio be 18 then the conversion price be $55.55.
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