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  • October 20, 2021
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Conversion Premium

The percentage by which the conversion price (in a convertible) exceeds the current stock price. The following equation illustrates this:

Percentage Conversion Premium

For example, if a convertible has a conversion ratio of 50 (that is, 50 shares are received in exchange for the bond with a par value of $1,000), and therefore the conversion price is ($1,000/50= $20), then the percentage conversion premium, supposing the share is trading at $15, is:

Percentage conversion premium = (20- 15)/15 = 33.33%


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