The lower bound on the market price of a convertible bond is

A) its straight-bond value.
B) its crooked-bond value.
C) its conversion value.
D) its straight-bond value and its conversion value.
E) None of the options are correct.

Convertible Bond

A bond with an option allowing the bondholder to exchange the bond for a specified number of shares of common stock in the firm. The conversion ratio specifies the number of shares. The conversion price is the current value of the shares for which the bond may be exchanged. The conversion premium is the excess of the bond’s value over the conversion value.

Straight-Bond Value

The value of a bond calculated without considering any embedded options, based purely on its coupon payments and maturity value.

Conversion Value

The monetary value of a convertible security if it were converted into a different form, usually shares of the company's common stock.