Question

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?

Answer 1

The bond's parity price = $960.

Step-by-step 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.