# Review Quiz Question error

Hi…there’s an error in the answer choices. It listed the answer twice.

https://app.achievable.me/study/finra-series-7/review

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Thank you, I’ve corrected this!

Hi…either I’m confused or there’s a couple of spell checks error on conversion features of convertibe bonds and common stocks…

Should that anti-dilution covenant pertain to COMMON STOCK on this question instead of preferred stock? Or am I not understanding it?

Heres the link to that section:
https://app.achievable.me/study/finra-series-7/learn/corporate-debt-products-convertible-bonds

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Hi @LASHY1980! While convertible preferred stock and convertible bonds are very similar, there were a few typos in this section. Where we mentioned preferred stock, it should have said ‘bond.’ These have been updated immediately.

Thanks for pointing this out!

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Oh ok. I was getting confused because they preferred stock and convertible bonds are so similar.

I have 2 questions…if you can clarify.

1. For the sake of simplicity b/w the formulas…is it safe to assume that the conversion formulas with anti-dilution for convertible bonds and convertible preferred stock the same formulas for stock splits and stock dividend?
Here’s what I understand for:
**stock split or SD factor:
new conversion price on pref. stock.= common stock mkt price/ SS factor or SD factor
new conversion price for convertible bond = bond mkt. price/SS factor or SD factor

new conversion ratio for convertible pref. stock = current conv.ratio x SS factor or SD factor
new conversion ratio for convertible bonds = current conv.ratio x SS factor or SD factor

Question 2:
Is the formula for Parity Pricing of Preferred Stock and Bond Parity Pricing the same? ( = common stock price x conv. ratio)

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Question 1
You’ve got it for the most part. Here’s what you’ll need to adjust:

New conversion price on pref. stock.= original conversion price / SS factor or SD factor
New conversion price for convertible bond = original conversion price / SS factor or SD factor

You’ll want to use the original conversion price (not the market price) for anti-dilution questions involving changing conversion prices or conversion ratios.

Question 2
Yep! You got it!

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Perfect! Thanks Brandon!

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