With reference to Convertible Bonds
Consider the following statements:
As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.
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?
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2