Convertible Bonds: Conversion Value, Premium, Bond Floor & Dilution

About this course

A convertible bonds course that analyses one fictional issue, the Norrow Grid 2.50% notes due 2031, in a spreadsheet, first as an investor and then as the issuer, for fixed income and equity analysts, corporate finance staff, CFA candidates and finance students. You turn the terms into the conversion ratio, conversion price and parity, compare five convertibles by conversion premium, income advantage and payback, value the bond floor with PV and PRICE and move it with the credit spread, chart the payoff profile and the investment premium, value the conversion option with Black-Scholes and add it to the floor, calculate the issuer's saving against straight debt and an IFRS-style liability and equity split, measure dilution and if-converted EPS, and test a soft call, forced conversion and the holder's put. Illustrative figures, educational only, not investment advice. The first lab is free.