Answer: the higher of the value of the straight bond and the conversion value.

**Explanation:** In an arbitrage-free framework, the minimum value of a convertible bond must be the greater of: 1. Its value as a straight bond (bond floor) 2. Its conversion value (stock value) This is because: - If the convertible bond trades below its straight bond value, investors could buy the convertible and sell the straight bond for risk-free profit - If the convertible bond trades below its conversion value, investors could buy the convertible, convert to stock, and sell the stock for risk-free profit Therefore, the minimum value is the **higher** of the straight bond value and conversion value to prevent arbitrage opportunities.

Author: LeetQuiz Editorial Team