Which of the following statements regarding convertible bonds is true?
A)The floor value is the lowest price a convertible bond will sell for.
B)The convertible bond's floor value is determined by the maximum of the straight bond value and the conversion value.
C)If the share price rises above the conversion price, investors will convert the bonds.
D)All of the above statements are true.

Question

Quizplus · Accepted Answer

A) True - a convertible bond's floor value is the lowest price it can trade for as a bond before conversion.
B) True - the floor value is determined by taking the higher of the straight bond value or conversion value, providing a "floor" price for the security.
C) True - if the stock price rises above the conversion price, investors may choose to convert their bond into equity to take advantage of potential price appreciation.

Which of the Following Statements Regarding Convertible Bonds Is True