Which one of the following statements is true?
A) Convertible corporate bonds are more secure than government bonds.
B) Convertible bonds often pay 3 to 4 percent more interest than nonconvertible bonds.
C) Because of the conversion feature, it is not necessary to evaluate convertible, corporate bonds.
D) There is no guarantee that bondholders will convert to common stock even if the market value of the common stock does increase in value.
E) Even if convertible bondholders convert their investment to common stock, the bondholders still receive interest payments.

Question

Quizplus · Accepted Answer

There is no guarantee that bondholders will exercise the conversion feature and convert their bonds to common stock. It is ultimately up to the bondholder to decide whether or not to convert, regardless of the market value of the common stock.

Which One of the Following Statements Is True