Conversion Premium Calculator

A convertible bond is a hybrid: the safety of a bond with an option to become stock. The conversion premium is the price of that option, measured as the percentage by which the bond costs more than the shares it converts into. A 20% premium means you pay a fifth more than the stock value for the bond’s protection and income.

Note: the previous version of this tool was broken by a script-encoding error and could not calculate at all. The tool below restores the full calculation with the same formulas: premium amount, premium percentage, conversion value, and the break-even parity price.

How to use the Conversion Premium Calculator

Enter the convertible bond’s market price, the underlying stock’s price, and the conversion ratio (shares per bond). If you already know the conversion value, enter it; otherwise the tool computes it as stock price × conversion ratio. You get the conversion value, the premium in dollars, the premium percentage, the break-even parity stock price, and a verdict.

Formula

Conversion Value = Stock Price × Conversion Ratio
Premium Amount = Bond Price − Conversion Value
Premium % = (Premium Amount / Conversion Value) × 100
Parity Price = Bond Price / Conversion Ratio

The parity price is the stock price at which converting breaks even: above it, conversion is in the money; below it, you hold the bond for its income and safety.

Worked example

A convertible bond trades at $1,200 with a conversion ratio of 20 shares, and the stock is at $50. Conversion value = $50 × 20 = $1,000.00. Premium = $1,200 − $1,000 = $200.00. Premium % = $200 / $1,000 × 100 = 20.00%. Parity = $1,200 / 20 = $60.00: the stock must reach $60 for conversion to break even. These figures were verified against the calculator above.

What competitors miss

The only true competitor computes the premium percentage and stops there. It cannot tell you the dollar premium, it never computes the conversion value for you, and it gives no break-even parity price, which is the number that actually answers “at what stock price does converting pay off.” This page shows all four figures plus a plain verdict, and it is the only page with copy and share for sending the analysis to a client or advisor.

Frequently asked questions

What does a high conversion premium indicate?
That the bond is priced well above its equity value. It usually reflects strong demand for the bond’s income and downside protection, but it also means converting is less attractive: the stock has to climb much further for the equity kicker to pay.

What does a zero or negative premium mean?
Zero means the bond costs exactly its conversion value (at parity). Negative means the bond trades at a discount to conversion value, an unusual situation that can signal forced selling or mispricing worth investigating.

Should I convert or hold the bond?
Convert when the stock is well above the parity price and the bond’s income no longer justifies the premium. Hold for the coupon income and downside protection when the stock is below parity. This tool gives you the numbers; the decision also depends on taxes, call provisions, and your outlook.

How is conversion premium different from bond premium?
Bond premium is what a straight bond costs above its face value. Conversion premium is specific to convertibles: what the bond costs above its conversion value. They measure different things.

Why does the calculator let me enter the conversion value directly?
Because market data feeds often publish conversion value or parity already. Entering it skips the stock × ratio step and still gives you the premium and verdict from your own numbers.

Is this financial advice?
No. This is a math tool for education and analysis. Convertible bonds carry credit, interest-rate, and call risk; talk to a qualified advisor before investing.