Conversion Parity Price Calculator
To find the conversion parity price, divide the value of the convertible security by the conversion ratio.
This calculator helps you determine the parity price of a convertible bond or security. The conversion parity price tells investors whether converting a bond into stock is a good deal or not. It helps in comparing the bond’s value with its equivalent stock value.
This tool is useful for investors, financial analysts, and traders dealing with convertible bonds, stocks, and purchasing power parity. Just enter the values, and the calculator gives the result instantly.
Formula:
The formula for conversion parity price is:
| Symbol | Meaning |
|---|---|
| CPP | Conversion Parity Price ($) |
| VCS | Value of Convertible Security ($) |
| CR | Conversion Ratio (Number of Shares) |
What is Conversion Parity Price?
The conversion parity price tells us how much each share is worth when a bond is converted into stock. If the conversion price is lower than the market price, converting the bond into shares can be profitable.
For example, if a $1,000 convertible bond can be exchanged for 50 shares, the parity price is $20 per share. If the market price is higher, the conversion is beneficial; if lower, it’s better to keep the bond.
Knowing the conversion parity helps in investment decisions, bond pricing, and market analysis.
Final Words:
Simply put, conversion parity price helps investors compare bond and stock values. This calculator makes it quick and easy to determine if conversion is a smart choice.
FAQs:
1. How do you calculate conversion parity price?
Use the formula: CPP = VCS ÷ CR, where VCS is the bond value and CR is the conversion ratio.
2. How do you calculate conversion price?
Conversion price is the price per share at which a bond can be converted into stock.
3. What does 100% parity mean?
It means the bond and stock values are equal, making conversion neutral—neither profitable nor a loss.