what is the answer to this question.  

we consider two bonds that are identical in every respect except that
one bond can be converted into common equity by the holder.  please
explain why or why not the convertible bond will have a higher yeild.

Hi fizzleclizze,

My guess is that the convertible bond will have a LOWER yield than a
non-convertible one. My reasoning is as follows.

Since a convertible bond gives the holder the additional flexibility
of converting that bond into equity, its fair value should be higher
than the vanilla bond. As we know, price and yield have an inverse
relationship so, all else being equal, the yield on the convertible
bond should be lower.

I hope that makes sense.