Convertible bonds pay lower interest rates than those lacking conversion features.

Question

Quizplus · Accepted Answer

This is generally true because the option to convert the bond into stock in the future provides additional value to the investor, and thus the issuer can offer a lower interest rate as compensation. However, there may be some exceptions where convertible bonds pay higher interest rates than non-convertible bonds due to factors such as credit risk or market conditions.

Convertible Bonds Pay Lower Interest Rates Than Those Lacking Conversion