Finance glossary
Convertible Bond
Definition
A bond that can be converted into a set number of company shares.
A convertible bond pays interest like a normal bond but lets the holder convert it into equity at a preset ratio. It offers downside protection from the bond floor plus upside if the stock rises. Issuers like it because it carries lower coupons than straight debt.
In a sentence
His convertible bond paid interest but could be swapped for shares if the stock took off.
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