Does anyone have any clever ways to memorize the convertible formulas? I love using mnemonic devices but I can’t think of any to apply to them. A great example I learned for current yield is electrical currents are measured by AMPs. (Current Yield = Annual Income / Market Price).
Convertible Formulas:
Conv. Ratio = Par / Conv. Price
Conv Price = Par / Conv. Ratio
Stock PP = Bond Market Pr. / Conv. Ratio
Bond PP = Stock Pr. / Conv. Ratio
Thank you!
Personally, I try to think of what these formulas mean rather than straight-up memorizing them.
The conversion ratio is basically how many of the resulting security you can get with a unit of the original security. Since there’s no free lunch and the resulting value will be equal, you can just divide the big price by the little price.
The conversion and parity price formulas are basically all the same formula: it’s the price of the original security divided by the ratio.
If anyone has acronyms or other tricks, I’d love to hear them!