Question

Q) the floor value of a convertible bond is: a) par value b) common equity value c) bond value d) conversion value

Answer 1

The floor value of a convertible bond is; "Bond Value". So option "c" is correct.

Convertible bond- It is a hybrid debt security that can be converted into equity. It pays interest because it has the bond features but on the other hand, it gives right to convert into the equity shares of the company.

Floor Value of a convertible bond- When the company's stock price is higher, it is good for convertible bond but if the share price is lower and company still pays interest on bond and makes the repayment also, this is considered as the "Floor value" or minimum value or "Pure bond value" of the convertible bond.