What is the conversion premium on a convertible bond?

Conversion premium = (Market Price - Conversion Value) / Conversion Value. It shows how much extra you're paying for the conversion option vs. immediately converting to equity.

Why do convertible bonds have lower coupon rates?

The embedded equity conversion option has value to the holder, so they accept a lower coupon (yield) as compensation for the option to convert to shares at a fixed price.

Convertible Bond Calculator

Value convertible bonds using a simplified lattice model or components approach. Calculate conversion value, investment value (straight bond floor), conversion premium, and parity to assess convertible bond attractiveness.

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$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Value convertible bonds using a simplified lattice model or components approach. Calculate conversion value, investment value (straight bond floor), conversion premium, and parity to assess convertible bond attractiveness. Use the convertible bond result to inform your calculation.

Convertible Bond Calculator

How to Use

Frequently Asked Questions

What is the conversion premium on a convertible bond?

Why do convertible bonds have lower coupon rates?