The value of a convertible security if it is converted immediately. Also called parity value or converted value.
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Market Conversion Price
The price one effectively pays for common stock when one exercises the conversion option of a convertible security. One calculates the market conversion price by dividing the price one paid for the convertible security by the conversion ratio, which is the number of shares of common stock one receives by exercising the conversion option. In order for the exercise of the option to be worthwhile, the market conversion price must be lower than the market price of common stock. It is also called the conversion parity price and the conversion value.
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The market value of the underlying asset(s) into which a convertible security may be exchanged. Generally, conversion value is calculated by multiplying the number of shares that can be obtained by the market price per share. Thus, a bond that can be converted into 30 shares of stock with a market price of $20 each has a conversion value of $600.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.