[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.]

[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.]

Which of the following is not an approach to attempt to value to a convertible security:
A . DCF analysis
B . Bootstrapping
C . Lower of bond value and value of converted shares
D . Bond value plus equity option value

Answer: B

Explanation:

Bootstrapping is not one of the various approaches to try to value a convertible security.

The rest of them are, and therefore Choice ‘b’ is the correct answer.