Which disadvantage faces investors in convertible bonds?

The disadvantage that investors in convertible bonds face is being "stuck with a lower coupon if the share price does not rise." Convertible bonds typically offer lower interest rates compared to standard bonds because they provide the option to convert them into equity at a later date. If the underlying stock price does not appreciate as anticipated, investors may find themselves in a position where they have accepted a lower coupon payment compared to non-convertible bonds, without the benefit of capital appreciation from equity conversion.

This scenario underscores the risk associated with convertible bonds, as their appeal is contingent upon favorable stock price performance. If the company’s equity doesn't perform well, investors are left with the bond's lower yield, and they miss out on potentially higher returns they could have earned from other investments.

Other options present different characteristics of convertible bonds but do not directly address a disadvantage to investors. Higher coupon obligations and guaranteed security over equity do not pertain to convertible bonds; they may mislead investors about their actual risk-reward profile. Similarly, while access to immediate cash could be an upside for certain financial instruments, it does not represent a disadvantage inherent to convertible bonds when compared to traditional fixed-income investments.