Which of the Following Statements Is True About Convertible Bonds

question 21

Multiple Choice

Which of the following statements is true about convertible bonds?

• A) The most significant disadvantage to a corporation of issuing convertible bonds is that they increase the cash that the firm must use to make interest payments.
• B) The typical conversion ratio is set so that the firm's stock price must appreciate 5% or less before it is profitable for the holder to convert the bond to stock.
• C) Firms that issue convertible bonds can do so at a lower interest rate.
• D) The typical issue of convertible bonds allows the holder of the bond to convert it to preferred stock.

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