2022 Economy - Financial Markets

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?

• 1 only
• 2 only
• Both 1 and 2
• Neither 1 nor 2