Question

True/False

The conversion price divided into the market value of a convertible bond provides the conversion ratio.

Answer 1

False

Step-by-step explanation:

The formula to compute the conversion ratio is shown below:

Conversion ratio = Par value of convertible security ÷ conversion price

The conversion ratio is computed by dividing the par value of convertible security or bond by the conversion price. The example is presented below:

Example: The par value is $1,000 and the conversion price is $20, so the conversion ratio is 50

Hence, the given statement is false