With convertible bonds, A. the company receives additional cash money when the c

Question

With convertible bonds,

A. the company receives additional cash money when the convertibles are converted.

B. Investors are willing to accept a lower interest rate on a convertible than on otherwise similar straight debt

C. Investors require a higher interest rate than on otherwise similar straight debt

D. the convertibles cannot be converted for at least 10 years

E. none of the above

A. the company receives additional cash money when the convertibles are converted.

B. Investors are willing to accept a lower interest rate on a convertible than on otherwise similar straight debt

Explanation / Answer

B.Investors are willing to accept a lower interest rate on a convertible than on otherwise similar straight debt

Note : Investors are willing to accept a lower interest rate on a convertible than on otherwise similar straight debt because convertibles are less risky than straight debt.

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