Minimum value, Financial Management

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The minimum value is the lower limit for the market value of a convertible bond. It is equal to the greater of the conversion value and the straight value. We can represent it as:

         Minimum value = Maximum (Conversion value, Straight value)

If the conversion price is considerably below the current market price of the equity share, the market price of the convertible bond will reflect the conversion value and will sell at a premium over the conversion value. In another situation, if the present market price of the equity share is lower than the conversion price, conversion of the bonds into equity shares may not at all happen and as a result the convertible bond will sell at or just higher than the straight value.


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