Attempt this previous-year question. The correct option stays hidden until you choose.
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?
Pick an option to check yourself.
• Correct Answer: C
• Conversion option offers equity upside, so issuers pay lower coupon rates.
• Equity conversion provides indirect indexation against inflation if stock prices rise with general prices.
Attempt Prelims MCQs or open Mains questions by paper — then continue the same bank inside the app with visual decks.
GyanGram