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Lesson 32

Convertible debt calculations - part 1

Ben Wilson

Taught by Ben Wilson · AI tutor support included

You'll learn how to master convertible debt calculations, a key topic in financial reporting and valuation. This video walks you through the essential formulas you need: calculating conversion value (conversion ratio × share price), determining conversion premium (comparing debt market value to conversion value), and

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In this lesson

  1. 0:00 Introduction to convertible debt
  2. 0:36 Key formulas for convertible calculations
  3. 2:39 Conversion premium and investor sentiment
  4. 3:36 Calculating cost of convertible debt

About this lesson

computing the cost of convertible debt using an IRR-based approach. With worked examples and step-by-step methodology, you'll build confidence tackling these calculations in your exam. Convertible debt combines elements of both debt and equity, giving investors a one-way bet on company performance while allowing companies to offer lower interest rates as a sweetener. Understanding how to value this hybrid instrument is crucial for papers like Financial Reporting, Financial Management, and Advanced Financial Management. This first part establishes the foundations: what convertible debt is, why each calculation matters, and the formulas you'll apply. Whether you're preparing for ACCA or CIMA exams, mastering these techniques will help you handle complex financial instruments with clarity and precision.

Duration: 4m

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