Since the conversion feature provides the purchaser of a convertible bond with the possibility of becoming a stockholder, convertible bonds are a less expensive form of financing than similar-risk nonconvertible or straight bonds.

Question

Quizplus · Accepted Answer

The possibility of stock conversion makes convertible bonds more attractive to investors, which in turn can lower the cost of financing for the issuer. Therefore, convertible bonds are generally less expensive than nonconvertible bonds of similar risk.

Since the Conversion Feature Provides the Purchaser of a Convertible