Multiple Select QuestionSelect all that applyThe three advantages that corporations have by issuing convertible bonds are:Multiple select question.interest rates are lower.if the bond is converted, it no longer has to be redeemed at maturity.convertible feature attracts investors who are concerned about less risky investments.convertible feature attracts investors who are interested in speculative gain.interest rates are higher.
Question
Multiple Select QuestionSelect all that applyThe three advantages that corporations have by issuing convertible bonds are:Multiple select question.interest rates are lower.if the bond is converted, it no longer has to be redeemed at maturity.convertible feature attracts investors who are concerned about less risky investments.convertible feature attracts investors who are interested in speculative gain.interest rates are higher.
Solution
The three advantages that corporations have by issuing convertible bonds are:
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Interest rates are lower: This means that corporations can borrow money at a lower cost compared to other forms of debt financing. This can help reduce their overall interest expenses and improve their financial position.
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If the bond is converted, it no longer has to be redeemed at maturity: Convertible bonds give the bondholders the option to convert their bonds into a predetermined number of shares of the issuing corporation's common stock. If the bond is converted, the corporation does not have to repay the principal amount of the bond at maturity, which can provide flexibility in managing their debt obligations.
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Convertible feature attracts investors who are concerned about less risky investments: The option to convert the bond into equity can make the investment more attractive to investors who are seeking lower-risk opportunities. By having the potential for equity participation, investors may perceive the investment as having a lower level of risk compared to traditional bonds.
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Convertible feature attracts investors who are interested in speculative gain: On the other hand, the convertible feature can also attract investors who are looking for potential speculative gains. If the issuing corporation's stock price increases significantly, the bondholders can benefit from the appreciation in the value of the converted shares.
It is important to note that the statement "interest rates are higher" is not one of the advantages of issuing convertible bonds.
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