What conversion premium is typical for new convertible issues?

New convertible bonds are typically issued at 20–35% conversion premium (stock must rise 20–35% before conversion is economic). Lower premiums reduce fixed income value but attract equity-oriented investors; higher premiums suit income-focused buyers.

What happens to conversion premium when the stock rises significantly?

As the stock rises above the conversion price, the bond trades increasingly like equity (delta approaches 1) and conversion premium compresses. Deep in-the-money converts trade at parity (stock price times conversion ratio). Holders may convert or sell to capture equity gains.

Convertible Bond Conversion Premium

Calculate conversion premium as (convertible bond price minus conversion value) / conversion value, where conversion value equals conversion ratio times stock price.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ 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. Calculate conversion premium as (convertible bond price minus conversion value) / conversion value, where conversion value equals conversion ratio times stock price. Use the convertible premium result to inform your calculation.

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