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which one of the following statements is true? group of answer choices all convertible corporate bonds are quality investments. convertible bonds often pay 3 to 4 percent more interest than nonconvertible bonds. because of the conversion feature, investors are attracted to the conservative gain that common stock conversion may provide. there is no guarantee that bondholders will convert to common stock even if the market value of the common stock does increase in value. even if convertible bondholders convert their investment to common stock, the bondholders still receive interest payments.

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A corporation may issue a bond known as a "corporate bond" to raise capital for a number of purposes, including ongoing operations, mergers and acquisitions, or business expansion.

Corporate bonds are they convertible?

  • Corporate bonds that are convertible into the issuing company's common stock are known as convertible bonds. Convertible bonds are issued by businesses to reduce their debt's coupon rate and postpone dilution. The number of shares an investor will receive in exchange for a bond depends on its conversion ratio.
  • Similar to an IOU, a bond is a debt obligation. By purchasing corporate bonds, investors are making a loan to the corporation issuing the bond. In exchange, the business agrees in writing to pay interest on the principal and, typically, to return the principal when the bond matures.
  • Example of a Convertible Bond : Think about a $1,000 par value Company XYZ bond that can be converted into common stock as an example. It has a 6% annual coupon that is due. The number of shares the investor will receive if he decides to convert is specified as the conversion ratio in the bond's prospectus.

To Learn more about Corporate bonds refer to :

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