Concerning convertible bonds, which of the following statements is not correct?
A) A convertible bond issue would generally have fewer restrictive covenants than an otherwise identical nonconvertible bond.
B) Convertible bonds can be issued at a lower coupon compared with otherwise non-convertible bonds.
C) If the value of a convertible bond exceeds the maximum of its straight bond value or its conversion value, the difference would be referred to as the option value.
D) Since convertible bonds will be exchanged for common stock, convertible bonds are generally not callable.

Question

Quizplus · Accepted Answer

Convertible bonds are often callable, which means the issuer has the right to repurchase the bonds at a predetermined price before maturity. This feature is used by issuers to protect themselves against the situation where the stock price increases significantly, and bondholders convert their bonds into a large number of shares.

Concerning Convertible Bonds, Which of the Following Statements Is Not