SIE EXAM COVERS CONVERTIBLE SECURITIES, SO BE PREPARED FOR QUESTIONS ON CONVERTIBLES
Lots of topics and subjects are covered by the Securities Industry Essentials (SIE) exam. One of the topics concerns convertible securities. "Convertible" means that the security, whether a preferred share or a corporate bond may be converted into shares of the company's common stock at the option of the convertible owner. Consider this example of convertible bonds issued by ABC Corporation. Each bond has a par value of $1,000. That means that the face value of each bond is $1,000. Assume that each ABC convertible bond is able to be converted into 20 shares of ABC common. For this example, assume that each ABC common sells for $52. Be prepared to see questions that ask for the following: 1) the conversion price of ABC bonds; 2) the parity price of ABC common; 3) the parity price of ABC bonds; 4) the conversion ratio of ABC bonds; and 5) whether a customer who owns ABC convertible bonds would profit upon converting into common shares. Bob Eder's Study for the Securitie...