Advantages of Convertible Bond Issue

Convertible bonds are company-issued bonds that can be converted into shares at some point in the future. This type of investment can offer many benefits/advantages such as the follows:

1) A convertible bond offers interest, known as a yield, to investors. The longer you hold the bond, the higher your yield rate will be. Such interest is paid to the investor even if the share price does not rise. If the share price on the market goes up, the bond also rises.

2) A convertible bond protects investor from a major loss during the market downturn.

3) Convertible bond gives investors more flexibility. If the company succeeds, you can convert the bonds into stocks that are valued higher than the bond.

4) This type of investment can protect you against market fluctuations, while at the same time providing annual gains. They are less volatile than common stocks.

5) An advantage for the issuing company is that it can offer the bond at a lower coupon rate than it would have to pay on a straight bond.

* Next: Advantages & Disadvantages of Debentures
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