The correct answer is: A. higher
A convertible bond is a bond that can be converted into a specified number of shares of common stock in the issuing company at a predetermined price. The coupon rate of a convertible bond is typically higher than the coupon rate of a non-convertible bond. This is because the convertible bond has the potential to increase in value if the stock price of the issuing company increases.
A lower coupon rate would make the convertible bond less attractive to investors, as they would be receiving a lower return on their investment. A variable coupon rate would make the convertible bond more volatile, as the coupon rate would be subject to change based on market conditions. A stable coupon rate would make the convertible bond less risky, but it would also offer a lower potential return.
Here are some additional details about each option:
- A. higher. As mentioned above, the coupon rate of a convertible bond is typically higher than the coupon rate of a non-convertible bond. This is because the convertible bond has the potential to increase in value if the stock price of the issuing company increases.
- B. lower. A lower coupon rate would make the convertible bond less attractive to investors, as they would be receiving a lower return on their investment.
- C. variable. A variable coupon rate would make the convertible bond more volatile, as the coupon rate would be subject to change based on market conditions.
- D. stable. A stable coupon rate would make the convertible bond less risky, but it would also offer a lower potential return.