Explain the concept of conversion parity, Financial Accounting

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Explain the concept of conversion parity

Response to the following problem:

Find the conversion value of a convertible preference share that carries a conversion ratio of 1.8, given that the market price of the underlying ordinary share is $40. Would there be any conversion premium if the convertible preference share were selling at $90? If so, how much (in dollar and percentage terms)?

Also, explain the concept of conversion parity, and then find the conversion parity of this issue, given that the preference share trades at $90.

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Financial Accounting: Explain the concept of conversion parity

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Financial Accounting: Explain the concept of conversion parity

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