A convertible’s bond floor, or bond value (also investment value), is the discounted value of its coupons and redemption value. It reflects the minimum value that a convertible bond can fall to, taking into account the present value of the remaining cash flows and principal repayment. This calculation considers the fixed income attributes of a convertible security in isolation. The discount rate applied to a bond’s cash flows is the sum of the risk-free rate for the corresponding maturity of the bond and a specific credit spread, which reflects the credit quality of the issuer. Without its conversion option, a convertible would be worth no more than its investment value.

This value is also known as a straight bond value.