Glossary

A convertible bond is a type of debt security issued by a corporation that can be converted into a specified number of shares of the issuing company's ordinary share at a later date. 🔄

These bonds offer the benefits of both bonds and stocks: investors receive regular interest payments, and they have the potential to profit from the company's stock price appreciation.

For example, a company might issue a $1,000 convertible bond with a 5% annual interest rate and a conversion ratio of 20 shares per bond.

Fun fact: Convertible bonds are often seen as a "best of both worlds" investment. 🌐 They can provide the safety and income of bonds with the potential for capital appreciation from stock price increases. However, they usually offer lower interest rates than non-convertible bonds, as investors are willing to accept lower yields in exchange for the potential upside.