The Floor Value Of A Convertible Bond Course Hero

The bond has 10 years maturity remaining and the discount rate on otherwise identical non convertible debt is 6 5.

The floor value of a convertible bond course hero. The bond floor is the value at which the. Multiplying the bond s conversion premium by the price of the firm s common shares. The xlarge corporation has a convertible bond outstanding with a conversion price of 28 per share the 1 000 par value bonds have a 5 coupon rate and 20 years to maturity. It should trade for at least its floor value regardless of how low the stock drops.

Multiplying the price of the firm s common stock by the conversion ratio b. The floor price of a convertible bond cannot fall below a. A convertible bond pays interest annually at a coupon rate of 5 on a par value of 1 000. Floor value the floor value of a convertible bond is the greater of 1.

Course hero has all the homework and study help you need to. Multiplying the price of the firm s common stock by the conversion ratio and adding the present value of the bond s face value. Each bond has a par value of 1000. Multiplying the bond s conversion premium by the price of the firm s common stock.

The bond has 10 years maturity remaining and the discount rate on otherwise identical non convertible debt is 6 5. Trusty has 800 000 outstanding shares paying a 0 50 annual dividend. The floor or pure bond value of a convertible bond is found by a. The lowest value that convertible bonds can fall to given the present value of the remaining future cash flows and principal repayment.

The value of these payments represents a convertible bond s floor or minimum value. Has 20 000 7 bonds convertible into 30 shares per bond. The firm s common stock is currently selling for. Step 1 sign in to your.

Why join course hero. Multiplying the price of the firm s common stock by the conversion ratio b. A convertible bond pays interest annually at a coupon rate of 5 on a par value of 1 000. The pure bond value.