Convertible bond and Book value (equity)

Hello all,

Hope someone can help explain the two concepts below:

  1. "Negative convextivy does not apply to convertible bond. " if the convertible bond has call option, can it have negative convextiy?

  2. Question 14 on Residual Income Chapter from Kaplan EOC. It states that "Zues uses Residual income mmodel …the currect rate method of foreign currency translation and reported translations gains. If he revises his valuation estimate, what is the impact on book value?

The answer says that "book value was not affected, however, because the gains were recorded to equity. What is the difference between equity and book value? I always thought they are the same things.

Thank you!

If it’s callable, it has negative convexity because of the call option, not because of the conversion option.

If the gain is recorded in OCI/Equity, but Assets and liabilities are the same, How is this going to work? Where’s the other entry?

Thank you for your answer!