The Floor Value Of A Convertible Bond Course Hero

The floor or pure bond value of a convertible bond is found by a. Floor value the floor value of a convertible bond is the greater of 1. Multiplying the price of the firm s common stock by the conversion ratio b.

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The Floor Price Of A Convertible Bond Cannot Fall Below A The Conversion Ratio Course Hero

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Multiplying the price of the firm s common stock by the conversion ratio and adding the present value of the bond s face value.

The floor value of a convertible bond course hero.

The value of these payments represents a convertible bond s floor or minimum value. It should trade for at least its floor value regardless of how low the stock drops. Earnings were 750 000 after paying 250 000. Course hero has all the homework and study help you need to.

Has 20 000 7 bonds convertible into 30 shares per bond. 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 price of a convertible bond cannot fall below a. Trusty has 800 000 outstanding shares paying a 0 50 annual dividend.

Step 1 sign in to your. 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. The floor or pure bond value of a convertible bond is found by a.

A convertible bond pays interest annually at a coupon rate of 5 on a par value of 1 000. The bond has 10 years maturity remaining and the discount rate on otherwise identical non convertible debt is 6 5. Each bond has a par value of 1000. The firm s common stock is currently selling for.

The pure bond value. Bond investment value value as a corporate bond without the conversion option based on the convertible bond s cash flow if not converted. A convertible bond pays interest annually at a coupon rate of 5 on a par value of 1 000. Multiplying the bond s conversion premium by the price of the firm s common stock.

The bond has 10 years maturity remaining and the discount rate on otherwise identical non convertible debt is 6 5. The lowest value that convertible bonds can fall to given the present value of the remaining future cash flows and principal repayment. The bond floor is the value at which the. Why join course hero.

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