What is meant by a convertible’s floor value?
| ♥ 0 |
What is meant by a convertible’s floor value? |
Answer and Explanation
Explanation
The straight-bond value is the present value of the principal and interest payments. A convertible bond cannot fall below its inherent value.
The conversion value is the amount that a...
Explanation
The straight-bond value is the present value of the principal and interest payments. A convertible bond cannot fall below its inherent value.
The conversion value is the amount that a convertible holder will receive upon conversion of the security; no holder will sell his convertible below this value.
Verified Answer
A convertible's price cannot fall below the floor value, which is the straight-bond value or conversion value (whichever is higher).
Purchase this answer to view it.
Login or register for free to purchase this solution with PayPal or credit cards securely
