The Floor Value Of A Convertible Bond Course Hero

The pure bond value.

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. Multiplying the bond s conversion premium by the price of the firm s common stock. The firm s common stock is currently selling for. The floor or pure bond value of a convertible bond is found by a.

The bond floor is the value at which the. Step 1 sign in to your. The bond has 10 years maturity remaining and the discount rate on otherwise identical non convertible debt is 6 5. Course hero has all the homework and study help you need to.

A convertible bond pays interest annually at a coupon rate of 5 on a par value of 1 000. The floor price of a convertible bond cannot fall below a. Trusty has 800 000 outstanding shares paying a 0 50 annual dividend. Why join course hero.

Earnings were 750 000 after paying 250 000. 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.

Multiplying the price of the firm s common stock by the conversion ratio b. Multiplying the bond s conversion premium by the price of the firm s common shares. Each bond has a par value of 1000. 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.

The floor or pure bond value of a convertible bond is found by a. The value of these payments represents a convertible bond s floor or minimum value. The lowest value that convertible bonds can fall to given the present value of the remaining future cash flows and principal repayment. Multiplying the price of the firm s common stock by the conversion ratio and adding the present value of the bond s face value.