The lower bound on the market price of a convertible bond is
A) its straight-bond value.
B) its crooked-bond value.
C) its conversion value.
D) its straight-bond value and its conversion value.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The lower bound on the market price of a convertible bond is determined by the higher of its straight-bond value and its conversion value. This ensures that the convertible bond's price does not fall below what it would be worth as a regular bond or what it could be converted into.

The Lower Bound on the Market Price of a Convertible