pyq/2022/prelims/65

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?

(A) 1 only

(B) 2 only

(C) Both 1 and 2

(D) Neither 1 nor 2