I understand that minimum value of a convertible bond must be greater than the conversion value, becasue if this were not the case then bond can be converted to stock and sell for more. But why should minimum value be greater than the straight value? Can someone please let me know?
I could figure this one out too.
Minimum value is NOT greater than conversion value. Min value is greater OF conversion value or straight value. Be aware that Minimum value is just that - min. the actual value will be higher.
Well… the value of a bond with an embedded long option is obviously more than the value of the same bond with no option…
Thanks guys. Yes Ohai I took some time to get the bell ringing in my brain.