The buyer of a convertible security accepts a lower rate of interest because of:

Question

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The buyer of a convertible security is willing to accept a lower rate of interest because of the possibility of becoming a shareholder in the future. Convertible securities can be converted into common stock at a predetermined price, giving the holder an opportunity to benefit if the company's stock price rises. This potential for capital appreciation compensates for the lower interest rate.

The Buyer of a Convertible Security Accepts a Lower Rate