Convert basic prices to market prices
Answers
Convertible securities (for example, convertible bonds and convertible preferred stocks) allow holders to exchange them for shares of the issuing company's common stock. The number of shares is determined by a conversion ratio that states the number of shares the investor can receive per convertible security, for example, 10 shares per one bond.
The market conversion price is the current price of a company's common stock when received in exchange for a convertible security. The market conversion price is determined by dividing the current market price of the convertible security by the security's conversion ratio.
For example, suppose a holder wishes to convert his or her ABC convertible bond into ABC shares. The bond's value at the time of the conversion is $800, and its conversion ratio is 20 shares per bond. Therefore, the market conversion price for the shares would be $40 per share ($800/20 common shares).
How are basic prices converted to market prices