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Which of the following statements is false with respect to factors that influence the attractiveness of financing with warrants and convertibles?
Correct Answer: B
Since a convertible bond will always be higher in price than the corresponding straight bond, its YTM will thus always be lower than that of a straight bond. If management expects future growth prospects to outweigh its risks, than issuing convertible bonds or bonds with warrants would imply that these future earnings will have to be shared among new shareholders as well. Thus, the more prudent move would be to issue straight bonds so that the exiting shareholders may keep those increased earnings amongst themselves.