What type of bond gives the bondholder options to obtain the highest r

QUESTION

What type of bond gives the bondholder options to obtain the highest return?

A) callable bonds
B) prerefunded bonds
C) convertible bonds
D) serial bonds
E) sinking-fund bonds

ANSWER

Answer: C
Explanation: C) Convertible bonds can be converted by the bondholder into common stock of the corporation that issued the bonds. Bondholders can decide whether the interest paid on the bonds or the value of the corporation’s stock will offer better overall returns.