The Floor Value Of A Convertible Bond Course Hero

The bond floor is the value at which the.

The floor value of a convertible bond course hero.

A convertible bond pays interest annually at a coupon rate of 5 on a par value of 1 000. Course hero has all the homework and study help you need to. 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. Multiplying the bond s conversion premium by the price of the firm s common shares.

The firm s common stock is currently selling for. The floor price of a convertible bond cannot fall below a. The pure bond value. Earnings were 750 000 after paying 250 000.

The lowest value that convertible bonds can fall to given the present value of the remaining future cash flows and principal repayment. Multiplying the bond s conversion premium by the price of the firm s common stock. Each bond has a par value of 1000. The floor or pure bond value of a convertible bond is found by a.

Floor value the floor value of a convertible bond is the greater of 1. Bond investment value value as a corporate bond without the conversion option based on the convertible bond s cash flow if not converted. It should trade for at least its floor value regardless of how low the stock drops. Why join course hero.

Step 1 sign in to your. The floor or pure bond value of a convertible bond is found by a. The bond has 10 years maturity remaining and the discount rate on otherwise identical non convertible debt is 6 5. A convertible bond pays interest annually at a coupon rate of 5 on a par value of 1 000.

Multiplying the price of the firm s common stock by the conversion ratio and adding the present value of the bond s face value. The value of these payments represents a convertible bond s floor or minimum value. Multiplying the price of the firm s common stock by the conversion ratio b. Has 20 000 7 bonds convertible into 30 shares per bond.