If a company's stock price is expected to increase substantially over the next few years,which of the following may entice potential bondholders to accept a lower coupon rate?

Question

Quizplus · Accepted Answer

Convertibility allows bondholders to convert their bonds into stocks at a predetermined price. If the stock price is expected to increase substantially, bondholders may be enticed to accept a lower coupon rate in exchange for the potential opportunity to convert their bonds into more valuable stocks. A and D do not relate to the potential increase in stock price, and a call feature allows the issuer to redeem the bonds before maturity, which does not benefit bondholders.

If a Company's Stock Price Is Expected to Increase Substantially