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The Conversion Option Attached to Convertible Bonds, Which Have a Floating

question 114

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The conversion option attached to convertible bonds, which have a floating conversion price per share, has an intrinsic value which is based on the fair market value of the shares at the time.


Definitions:

Required Return

Required Return is the minimum annual percentage earned by an investment that will induce individuals or companies to put their money into a particular security or project.

Stock Price

The cost of purchasing a share of a company as quoted on the stock exchange.

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividend payments to its shareholders.

Required Return

The minimum return that an investor expects to receive from an investment to compensate for its risk.

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