Convertible Security: These are securities that convert into common stock with specified time period Convertible securities are convertible bond and convertible preference share. Convertible bond has a facility to convert it to shares. So, the interest rate is low in comparison to non-convertible bond. What is Conversion Ratio? Conversion Ratio: It refers the number of shares a convertible security holder receives after converting its security to shares. Formula: Conversion ratio = P/CP Where, P = Par value of bond CP = Conversion price Conversion Price: It is a price of per shares given to convertible security holder in exchange of shares. Formula: Conversion Price = P/CR Where, P = Par value of bond CR = Conversion Ratio Conversion Value: It is the value of share price an investor receives after converting the bond or preference shares into common shares. Formula: Conversion Value = CR* P s Where, CR = Conversion Ratio P s =Price per Share ...
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