Question

Convertible bonds are attractive to investors because a.they can be converted into stock at a future time. b.they carry a convertible interest rate that can be increased when the prime rate of interest increases. c.the issuing company cannot retire the bonds before maturity. d.they usually carry a higher rate of interest than non-convertible bonds.

Answer 1

a. they can be converted into stock at a future time.

Step-by-step explanation:

A bond can be defined as a debt or fixed investment security, in which a bondholder (investor or creditor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time.

Generally, the bond issuer is expected to return the principal (face value) at maturity with an agreed upon interest (coupon), which are paid at fixed intervals.

A convertible bond can be defined as a type of bond that avails the bondholder the opportunity, right or obligation to convert the bond into a predetermined (fixed or specific) number of shares of common stock in the company issuing the bond. Thus, this feature or characteristics of convertible bonds make them attractive to bondholders (investors) because they can be converted into stock at a future time or at the issuer's option.