Definition for : Bond value of the convertible bond

The Value of a convertible Bond is made of three components: Value of a Straight bond, conversion Value of a convertible Bond, and Time value (this is a Value of a Call option on shares of the issuer). Bond Value of a convertible Bond is the Value of a Straight bond. This Value is derived by Discounting Future cash flows of a convertible Bond at a Market Rate of return for the level of Risk of this issuer, as if a convertible Bond were a Straight bond.

(See Chapter 25 Selling securities of the Vernimmen)

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