The "Floor" or Pure Bond Value of a Convertible Bond

question 7

Multiple Choice

The "floor" or pure bond value of a convertible bond is found by

• A) 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 stock.
• C) multiplying the price of the firm's common stock by the conversion ratio and adding the present value of the bond's face value.
• D) adding the present value of the bond's interest payments to the present value of the bond's face value.

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