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?

Convertible Bonds are corporate debt securities that pay interest but can be converted into equity shares.

They are hybrid securities, offering features of both bonds and stocks.

Issuing convertible bonds helps companies raise capital without negatively impacting investor sentiment. It also provides investors with downside protection and upside potential.

Companies can issue debt at lower interest rates because of the conversion option. Therefore, Statement 1 is correct.

The option to convert to equity also provides bondholders with some protection against rising consumer prices (indexation). Therefore, Statement 2 is also correct.

Hence, both statements 1 and 2 are correct.