Convertible Bond Calculator
Compare a convertible bond's value as a bond vs converted to shares.
Work out whether a convertible bond is worth more as a bond or converted into shares. Enter face value, conversion ratio and share price.
What this tool does
A convertible bond can be held to maturity at face value or exchanged into shares at the conversion ratio. This calculator determines which option holds greater value by comparing the bond's face value against its conversion value (conversion ratio multiplied by the current share price). The result shows the higher of these two values, the conversion premium or discount, and whether conversion is currently profitable. The calculation is driven primarily by movements in the share price relative to the conversion ratio. For example, an investor might use this to assess a convertible bond position when share price fluctuates. The calculator provides a simplified snapshot and does not account for coupon payments, time remaining to maturity, credit risk, interest rate changes, or other market factors that influence actual convertible bond pricing.
Quick answer: with the default values, the result is $1,200.00 (Rational Value (Convert)). Adjust the values below for your own figures.
Enter Values
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Formula Used
Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
A bond with a 1,000 face value converting into 20 shares at a 60 share price has a conversion value of 1,200 — worth more converted than held. A share price of 45 gives a conversion value of 900, so the bond is worth more as debt.
How to use it
Enter the bond's face value (or its current market price if you're comparing a traded convertible), the conversion ratio (how many shares each bond converts into), and the share price.
What the result means
The primary result is the higher of bond value and conversion value — the minimum rational bondholder value today. The secondary rows show both sides and the gap. A positive conversion premium means the bond is trading above its conversion value (common while the option has time value); a negative one means the bond is trading at a discount to its convert-and-sell value.
What this doesn't model
Time value, credit risk, call features, and coupon cash flows. For a full convertible valuation you need a binomial tree or Monte Carlo approach. This tool gives you the floor — the higher of the two simple values — which is usually the useful first check.
A worked example
With the defaults: bond face value of 1,000, conversion ratio of 20, current share price of 60. The tool returns 1,200.00.
What moves the number most
The result responds to Bond Face Value, Conversion Ratio, and Current Share Price.
The formula behind this
The rational holder value is the higher of the bond's face value and its conversion value (ratio × share price). This is a simplified view — it ignores coupon value, time to maturity, credit spread, call features, and option time value. For a traded convertible, market price typically sits above this floor.
At a £60 share price with 20 shares per bond, your convertible bond's value is $1,200.00.
Inputs
| Bond Face Value | $1,000.00 |
|---|---|
| Conversion Value | $1,200.00 |
| Conversion Premium | -$200.00 |
| Conversion Ratio | 20 |
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
The calculator computes convertible bond value as the maximum of two amounts: the bond's face value and its conversion value, calculated by multiplying the conversion ratio by the current share price. This approach models the rational floor value a convertible holder would exercise — choosing whichever option delivers greater worth. The model assumes the conversion ratio and share price remain constant and treats the bond as a simple choice between redemption at face value or conversion into shares. It does not account for coupon payments, time remaining to maturity, credit risk premiums, issuer call provisions, or the time value embedded in the conversion option. Actual traded convertible prices typically exceed this calculated floor, reflecting these omitted factors and market conditions.
Frequently Asked Questions
What is the conversion premium?
Is converting better whenever the share value is higher?
Does this include coupons?
What's a typical conversion ratio?
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