# Floor price of Convertible Bond

Calculate convertible bond. Please see the attachment.

Florida Enterprises is considering issuing a 10-year convertible bond that will be priced at its $1,000 par value. The bonds have an 8.0 percent annual coupon rate, and each bond can be converted into 20 shares of common stock. The stock currently sells at $40 a share, has an expected dividend in the coming year of $5, and has an expected constant growth rate of 5.0 percent. What is the estimated floor price of the convertible at the end of Year 3 if the required rate of return on a similar straight-debt issue is 10.0 percent?

https://brainmass.com/economics/bonds/floor-price-of-convertible-bond-304489

#### Solution Summary

The solution explains how to calculate the Floor price of Convertible Bond

$2.19