115. which of the following statements about warrants and convertibles is FALSE?

Question

115. which of the following statements about warrants and convertibles is FALSE?

a.the value of both warrents and convertibles depends on the stock price

b. one primary difference between warrents and convertibles is that warrentsbring in additionall funds to the firm when exercised while convertibles reduce debt when exercised.

c. the coupon rate on convertible debt is higher the the coupon rate on simlar straight debt because convertbles are risker.

d. warrents and convertbles are used by corporations in order to get a lower rate on their debt

Explanation / Answer

Answer is option c.

Option C mentions that the coupon rate of convertible debt is higher when compared to that of straight debt.This is a false statement.

Generally the coupon rate on the convertible debt is lower than the straight debt, because the convertibel debt offers the advantage of both the debt and later the advantage of having the rights of share holder once the bonds are converted to shares.

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