Convertible bonds typically have low coupon rates but are of additional value through the option to convert the bond to stock and thereby participate in further growth in the company's equity value.

Question

Quizplus · Accepted Answer

Convertible bonds have a lower coupon rate because they offer the potential for the bondholder to convert the bond into stock in the issuing company, allowing them to benefit from potential future growth in the equity value. This feature provides additional value to investors beyond the coupon rate.

Convertible Bonds Typically Have Low Coupon Rates but Are of Additional