The minimum price of a convertible bond is
A) Min (Bond Value, Conversion Value).
B) Max (Bond Value, Conversion Value).
C) Min (Stock Value, Conversion Value).
D) Max (Stock Value, Conversion Value).
E) None of the above.

Question

Quizplus · Accepted Answer

The minimum price of a convertible bond is the maximum of its bond value (as a straight bond) and its conversion value (value if converted into stock). This ensures the bondholder receives the greater of the two values.

The Minimum Price of a Convertible Bond Is