Read the given below two statements and mark the correct answer.

Assertion (A):  Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period.
Reason (R) : A holder of FCCB has the option of either converting them into equity shares at any rate, or retaining the bonds.

Assertion (A) is true but Reason (R) is False

The correct answer is option 3- Assertion (A) is true but Reason (R) is False.

Assertion (A):  Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period. THIS IS TRUE.
Reason (R) : A holder of FCCB has the option of either converting them into equity shares at any rate, or retaining the bonds. THIS IS FALSE. Holder can convert at a predetermined rate not any rate.

Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period. Thus, a holder of FCCB has the option of either converting them into equity shares at a predetermined price or exchange rate, or retaining the bonds. The FCCB’s are issued in a foreign currency and carry a fixed interest rate which is lower than the rate of any other similar non-convertible debt instrument. FCCB’s are listed and traded in foreign stock exchanges. FCCB’s are very similar to the convertible debentures issued in India.