Explain why the yield on a convertible bond is lower than the yield on an otherwise identical bond without a conversion feature.

(Select the best choice below.)

A.

The option to convert the bond into stock is valuable, hence its price will be higher and its yield higher.

B.

The option to convert the bond into stock is valuable, hence its price will be higher and its yield lower.

C.

The option to convert the bond into stock is valuable, hence its price will be lower and its yield higher.

D.

The option to convert stock into bonds is valuable, hence its price will be higher and its yield lower.