All are advantages of convertible debentures EXCEPT which of the following?

The advantages of convertible debentures include various beneficial features; however, one potential misconception is regarding interest rates. Convertible debentures typically offer investors a regular fixed interest rate, which may not necessarily be higher than comparable non-convertible debt.

The correct response identifies that while holders of convertible debentures do enjoy the opportunity to convert their debt into equity (common stock), and they benefit from a fixed rate of interest, the assertion that they receive a higher initial rate of interest is generally not accurate. In fact, the presence of the conversion feature often leads issuers to offer a lower interest rate than what might be found with traditional non-convertible bonds. Therefore, stating that the holder receives a higher rate of interest contradicts the common structure of these types of securities, as they typically strike a balance between providing a lower interest rate while offering growth potential through conversion.

By understanding these dynamics, one can better grasp the nature of convertible debentures in the context of investment strategies and the balance of risk and reward they present to investors.