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24 November, 13:24

A convertible bond is convertible into common stock at a 32:1 ratio. The common stock is currently trading at $30. The bond is currently trading at $980. What is the parity price of the common stock?

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  1. 24 November, 17:03
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    The bond's parity price = $960.

    Explanation:

    The parity price is when we compare two assets which the same value, in this case a bond into common stock.

    The bond's parity price is calculated by this formula =

    stock's market price * conversion ratio = $30 X 32 = $960.
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