Question

What is and who has an option in a convertible bond?

Answer 1

The bond holder has an option to convert the bond that is holding into pre determined number of common shares or equity shares. The conversion can take lace at certain time during the bonds life.

A convertible bond is a fixed income security, that pays interests. These bonds generally have low rate of interest in comparison to other bonds. Convertible bond scan be converted into stocks, and can take advantage of the rising prices of stock. As these bond offer a lower coupon rate, companies issue these bonds as investors will accept these bonds at a lower coupon rate as well.