You know, as I am sitting here trying to remember the favorable income differential for to calculate premium payback period, it suddenly occured to me that I have 6 or so CFA postcards to send out to my friends and family. Remember these gems that showed-up with our materials when we registered for the exam? Who do you plan to send these wonderful items out to?
CFAI should stop trying so hard to be funny and get back to what they do best…ruining my life.
Lets get back to whats important – Hannah Montana is on in 10 minutes.
I hear that next year’s postcards will include the following: 1) A picture of a candidate at a psychologists office with the phrase: “What does is mean to really know the material?” 2) 2 children with sad faces sitting at the dinner table: “Is Daddy alive? Where is he? 3) A candidate at the computer terminal who has just learned he/she failed L2. This one will be two pages and when you open it up Jim McKay’s voice will be heard saying: ’ You know what the agony of defeat means, don’t you?”
FastEd Wrote: ------------------------------------------------------- > You know, as I am sitting here trying to remember > the favorable income differential for to calculate > premium payback period, it suddenly occured to me > that I have 6 or so CFA postcards to send out to > my friends and family. Remember these gems that > showed-up with our materials when we registered > for the exam? Who do you plan to send these > wonderful items out to? hate to go all serious on you, but I just drew a blank on that premium payback period care to give a general overview or even better of I’d know which reading its in?
Go to valuation of convertible securities… This is a two part process. The general equation is market premium per share/favorable income differential. The favorable income differential is calculated as [coupon interest - (common stock divs paid X Conversion Ratio)] / Conv. Ratio. Other equations needed to get to these values: Market Conversion Premium Per Share is calculated as market conversion price - current market price. Market Conversion Price is calculated as market price of convertible security / conversion ratio. Other notes: the preimum payback period tell the analyst how long it will take to earn back the preimum ASSUMING dividends do not change.
There it is, its all coming back now. Thanks for the quick refresher, quick catches like these on areas I’ve blanked out on will be invaluable on exam day. If one of these questions comes up I’ll owe you one.