All other factors being equal a $1,000,000,10 year,8% face rate convertible bond will differ how from a $1,000,000,10 year,8% nonconvertible bond.

Question

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A convertible bond typically has a lower interest rate than a nonconvertible bond because investors are willing to accept a lower interest rate in exchange for the option to convert the bond into equity in the future. However, the market rate of interest will generally be higher for a convertible bond due to the lower interest rate. As a result, the cash proceeds from the sale of the convertible bond will be smaller compared to a nonconvertible bond.

All Other Factors Being Equal a $1,000,000,10 Year,8% Face Rate