Question #65

With reference to Convertible Bonds, consider the following statements:

1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.

2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.

Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2