Which of the Following Statements Is True of Convertible Bonds

Multiple Choice

Which of the following statements is true of convertible bonds?

A) The most significant disadvantage to a corporation of issuing convertible bonds is that they increase the cash that the firm must use to make interest payments.
B) The typical conversion ratio is set so that the firm's stock price must appreciate 5% or less before it is profitable for the holder to convert the bond to stock.
C) Firms that issue convertible bonds can do so at a lower interest rate.
D) The typical issue of convertible bonds allows the holder of the bond to convert it to preferred stock.