Investopedia

Continue to Site »

Conversion Premium

Filed Under »
Dictionary Says

Definition of 'Conversion Premium'

The amount by which the price of a convertible security exceeds the current market value of the common stock into which it may be converted. A conversion premium is expressed as a dollar amount and represents the difference between the price of the convertible and the greater of the conversion or straight-bond value. Convertibles are securities, such as bonds and preferred shares, that can be exchanged for a specified number of another form (typically common stock) at an agreed-upon price. Convertibles can be converted at the will of the investor or the issuing company can force the conversion.
Investopedia Says

Investopedia explains 'Conversion Premium'

The conversion premium compares the current market against the higher of the conversion value or straight-bond value. The conversion value is equal to the conversion ratio multiplied by the common stock's market price. For example, if a company issues a convertible bond that can be exchanged in the future for 50 shares of common stock and the common stock is currently valued at $30 per share, the conversion value is $1500 (50 shares X $30). The straight-bond value, on the other hand, is the value of the convertible if it did not have the conversion option.

Articles Of Interest

  1.

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.

  2. Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.

  3. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  4. 6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.

  5. Top 5 Budgeting Questions Answered

    You don't need a degree to understand your money, begin saving and pay down debt.

  6. Asset Allocation: The First Step Toward Profit

    Understanding the different asset classes is an essential part of portfolio diversification.

  7. Junk Bond

    Find out more about these bonds that have a high risk of default.

  8. Guaranteed Retirement Income In Any Market

    By laddering annuities, you can be sure you'll have income no matter what the market does.

  9. Debentures

    Learn more about this type of debt instrument.

  10. Besides a savings account, where is the safest place to keep my money?

    Savings accounts are safe because investors' deposits are guaranteed by the Federal Deposit Insurance Corporation (FDIC) for bank accounts or the National Credit Union Administration (NCUA) for ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  2. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  3. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  4. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  5. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.

  6. Lease To Own

    An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time.
Trading Center