Investors typically classify investments into either the fixed income or equity category. But not all securities fit into only one niche.
Convertible bonds have both bond-like and stock-like features.
A convertible bond is a bond that provides a stated coupon, but that also gives the holder the right to convert the bond to a specified number of shares of the issuing company’s common stock. Depending on market conditions, an investor’s return may be more bond-like, based on the stated interest rate, or it may be more equity-like, due to its conversion features.
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