Convertible bonds tend to offer a(n) ________ return than nonconvertible bonds.

Question

Quizplus · Accepted Answer

Convertible bonds typically offer a lower return than nonconvertible bonds because they come with the added value of the conversion feature, which allows the bond to be converted into a predetermined number of shares of the issuing company's stock. This conversion feature is valuable to investors, so they are generally willing to accept a lower yield in exchange for the potential upside of converting the bond into stock if the company's share price appreciates significantly.

Convertible Bonds Tend to Offer A(n) ________ Return Than Nonconvertible