Investment VehiclesQuestion 33 of 110
A convertible bond gives the holder the right to:
a.Exchange the bond for a set number of the issuer's common shares
b.Demand early repayment of principal at any time
c.Receive a floating interest rate tied to inflation
d.Vote on corporate board elections while holding the bond
Explanation
A convertible bond can be exchanged for a predetermined number of the issuer's common shares, letting holders participate in stock appreciation. This conversion feature usually allows the issuer to offer a lower coupon. Bondholders do not vote unless and until they convert to stock.
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