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Forced conversion

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Definition of Forced conversion

Forced Conversion Image 1

Forced conversion

Use of a firm's call option on a callable convertible bond when the firm knows that the
bondholders will exercise their option to convert.



Related Terms:

Take-up fee

A fee paid to an underwriter in connection with an underwritten rights offering or an
underwritten forced conversion as compensation for each share of common stock he underwriter obtains and
must resell upon the exercise of rights or conversion of bonds.


Cash conversion cycle

The length of time between a firm's purchase of inventory and the receipt of cash
from accounts receivable.


cash conversion cycle

Period between firm’s payment for materials
and collection on its sales.


conversion

the process of transformation or change


Conversion

The act of changing from one type of life insurance policy to another, without having to give evidence of insurability.



conversion cost

Refers to the sum of manufacturing direct labor and overhead
costs of products. The cost of raw materials used to make products
is not included in this concept. Generally speaking, this is a rough measure
of the value added by the manufacturing process.


conversion cost

the total of direct labor and overhead cost;
the cost necessary to transform direct material into a finished good or service


Forced Conversion Image 2

Conversion factors

Rules set by the Chicago Board of Trade for determining the invoice price of each
acceptable deliverable Treasury issue against the Treasury Bond futures contract.


Conversion parity price

Related:Market conversion price


Conversion premium

The percentage by which the conversion price in a convertible security exceeds the
prevailing common stock price at the time the convertible security is issued.


Conversion ratio

The number of shares of common stock that the security holder will receive from
exercising the call option of a convertible security.


Conversion Right

Term life insurance products are offered as non-convertible or convertible to a certain time in the future. The coversion right has a time limit, usually to the policy holder's age 60 or possibly even age 70. This right means that the policy holder has the right to convert their existing policy to another specific different plan of permanent insurance within the specified time period, without providing evidence of insurability. There is a slightly higher cost for a term policy with the conversion priviledge but it is a valuable feature should a policy holder's health change for the worst and continued insurance coverage becomes a necessity.
Most often this right is also granted to individuals covered under employee group benefit policies where individuals leaving the employee group have a limited amount of time, usually anywhere from 30 to 90 days, to convert to a specific permanent individual policy without evidence of insurability.


Conversion value

Also called parity value, the value of a convertible security if it is converted immediately.


Market conversion price

Also called conversion parity price, the price that an investor effectively pays for
common stock by purchasing a convertible security and then exercising the conversion option. This price is
equal to the market price of the convertible security divided by the conversion ratio.


Stated conversion price

At the time of issuance of a convertible security, the price the issuer effectively
grants the security holder to purchase the common stock, equal to the par value of the convertible security
divided by the conversion ratio.



 

 

 

 

 

 

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