The theoretical floor value for a convertible bond is its
A) conversion price.
B) conversion value.
C) par value.
D) pure bond value.

Question

Quizplus · Accepted Answer

The pure bond value represents the value of the bond if it were just a regular, non-convertible bond, without the conversion feature. This is the minimum value that the convertible bond should have, as the inclusion of the conversion feature should add value to the instrument. Therefore, the theoretical floor value for a convertible bond is its pure bond value.

The Theoretical Floor Value for a Convertible Bond Is Its