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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. (a)1 only
  2. (b)2 only
  3. (c)Both 1 and 2
  4. (d)Neither 1 nor 2
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Official answer(c) Both 1 and 2