What is CONVERTIBLE BOND?

A hybrid DEBT/EQUITY security that consists of a COUPONbearing BOND and an embedded equity OPTION that allows the investor to convert into a specified number of shares of COMMON STOCK once the CONVERSION PRICE is reached. Convertible bonds are generally issued at par with CONVERSION PREMIUMS of 1525 percent and final maturities of 10 to 15 years. See also CONDITIONAL PUT CONVERTIBLE BOND, EXCHANGEABLE BOND, LOW PREMIUM CONVERTIBLE BOND, MANDATORY CONVERTIBLE BOND, PUTABLE CONVERTIBLE BOND, REVERSE CONVERTIBLE BOND, ZERO COUPON CONVERTIBLE BOND.

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