What is a Convertible Bond?

A convertible bond, also known as convertible debt, is debt that can be converted to equity (in the form of common stock) at the discretion of the bondholder.

There are typically windows that an investor can choose to convert the bond to equity, which an investor may choose to do if they have confidence the company will continue to perform well.

Because a convertible bond has the option to convert to stock, it typically offers a lower interest rate since the conversion capability itself has value.

What Types of Bonds Are There?
What is a Corporate Bond?
What is a Callable Bond?