The Theoretical Floor Value For A Convertible Bond Is Its

Downside protection is ineffectual if the bond is bought at a large premium over floor value interest rates on the debt instrument part of a convertible bond are frequently below market interest rates.

The theoretical floor value for a convertible bond is its.

It is convertible into 15 common shares which presently sell for 50 per share. The theoretical floor value for a convertible bond is its. Question 7 of 20. The minimum theoretical value of a warrant to buy 6 shares of a firm s stock at 50 per share is 10 what is the current market price of the firm s stock.

A convertible bond is currently selling for 855. The theoretical floor value for a convertible bond is its. The lowest value that convertible bonds can fall to given the present value of the remaining future cash flows and principal repayment. The theoretical floor value for a convertible bond is its.

Conversion value equals the pure bond value. Bond valuation is a technique for determining the theoretical fair value of a particular bond. The conversion value represents the value of the common stock into which the bond can be converted. The theoretical floor value for a convertible bond is its.

As the price of common stock increases the market price of a convertible bond and the conversion value increase. A convertible bond is currently selling for 970. D pure bond value. It should trade for at least its floor value regardless of how low the stock drops.

This represents the security s floor value or the minimum price at which it should trade as a nonconvertible bond. The conversion premium is the greatest and the downside risk the smallest when the. Pure bond value. True false question 30 marks.

In order to calculate basic earnings per share the earnings after taxes have to be adjusted for the elimination of the convertible bond interest expense. Conversion value is greater than the pure bond value. The conversion premium is 5. A 51 67 b 50 00 c 60 00 d 5 00.

The value of these payments represents a convertible bond s floor or minimum value. Bond valuation includes calculating the present value of the bond s future interest payments also. The bond floor is the value at which the. The investment value is the theoretical value at which the bond would trade if it were not convertible.