Which one of the following statements about convertibles are false?I) The longer the call protection on a convertible, the less the security is worth.II) The more volatile the underlying stock, the greater the value of the conversion feature.III) The smaller the spread between the dividend yield on the stock and the yield-to-maturity on the bond, the more the convertible is worth.IV) The collateral that is used to secure a convertible bond is one reason convertibles are more attractive than the underlying stock.

Question

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Statement I is false because longer call protection generally increases the value of a convertible. Statement III is false because a smaller spread between the dividend yield and yield-to-maturity does not necessarily increase the convertible's worth. Statement IV is false because convertibles are not typically secured by collateral, unlike some bonds.

Which One of the Following Statements About Convertibles Are False?I)