The current market interest rate for $1,000, 10-year bonds of large corporations in the food industry is 6.3 percent. If a large corporation in the food industry wants to sell $1,000, 10-year bonds with a 4.9% annual interest rate, what type of bond should they consider issuing?

Question

Franco Spears

Business

28 May, 21:56

The current market interest rate for $1,000, 10-year bonds of large corporations in the food industry is 6.3 percent. If a large corporation in the food industry wants to sell $1,000, 10-year bonds with a 4.9% annual interest rate, what type of bond should they consider issuing?

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Answers (1)

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Ward · Answer 1

Convertible bonds

Explanation:

One advantege of convertible bonds for the issuer is that bondholders are willing to accept a loxer interest rate because they have an option of converting their bonds to common stock.

If a company wants to issue bonds at an interest rate that is lower than the current market interest rate, they should offer convertible bonds.