{"id":961,"date":"2013-06-06T05:07:07","date_gmt":"2013-06-06T05:07:07","guid":{"rendered":"http:\/\/www.mometrix.com\/academy\/?page_id=961"},"modified":"2025-12-05T12:34:35","modified_gmt":"2025-12-05T18:34:35","slug":"convertible-bonds","status":"publish","type":"page","link":"https:\/\/www.mometrix.com\/academy\/convertible-bonds\/","title":{"rendered":"Convertible Bonds"},"content":{"rendered":"<h1>What is a Convertible Bond?<\/h1>\n<div class=\"lyte-wrapper fourthree\" title=\"Convertible Bonds\" style=\"width:420px;max-width:100%;margin:5px auto;\"><div class=\"lyMe\" id=\"WYL___bg5z9qt4k\"><div id=\"lyte___bg5z9qt4k\" data-src=\"https:\/\/www.mometrix.com\/academy\/wp-content\/plugins\/wp-youtube-lyte\/lyteCache.php?origThumbUrl=https%3A%2F%2Fi.ytimg.com%2Fvi%2F__bg5z9qt4k%2Fhqdefault.jpg\" class=\"pL\"><div class=\"tC\"><div class=\"tT\">Convertible Bonds<\/div><\/div><div class=\"play\"><\/div><div class=\"ctrl\"><div class=\"Lctrl\"><\/div><div class=\"Rctrl\"><\/div><\/div><\/div><noscript><a href=\"https:\/\/youtu.be\/__bg5z9qt4k\" rel=\"nofollow\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.mometrix.com\/academy\/wp-content\/plugins\/wp-youtube-lyte\/lyteCache.php?origThumbUrl=https%3A%2F%2Fi.ytimg.com%2Fvi%2F__bg5z9qt4k%2F0.jpg\" alt=\"Convertible Bonds\" width=\"420\" height=\"295\" \/><br \/>Watch this video on YouTube<\/a><\/noscript><\/div><\/div><div class=\"lL\" style=\"max-width:100%;width:420px;margin:5px auto;\"><\/div>\n<div class=\"accordion\"><input id=\"transcript\" type=\"checkbox\" class=\"spoiler_button\" \/><label for=\"transcript\">Transcript<\/label>\n<div class=\"spoiler\" id=\"transcript-spoiler\">\n<p>Today in this video we want to go over convertible bonds (convertible bonds). What is a <b>convertible bond<\/b>? Basically, it&#8217;s a <b>corporate bond<\/b> that the corporation issues and sells that has a lower interest yield on it, but with this added benefit or incentive\u2014that the bond can be then converted into a particular number of shares of common stock in the issuing entity.<\/p>\n<p>You get the benefits of a good upside and downside, potentially. There&#8217;s less risk, but with less risk you often get less reward. It&#8217;s a corporate bond that, if it goes to maturity and pays off, then it&#8217;s going to have a lower interest yield than a regular bond would, but hidden inside of it is this ability to convert it (to convert the bond) into shares of common stock in the company.<\/p>\n<p>If the company takes off and starts doing well, then you can convert your bond into <b>shares<\/b> in the company and benefit from that. There is always, stipulated in the bond, a conversion price, so I&#8217;ve got an example on the board here. Let&#8217;s say the par price is 1,000 dollars, the conversion price is 20 dollars.<\/p>\n<p>Take the par price divided by the <b>conversion price<\/b> and that gives you the number of shares it could be converted into, so in this case 1000 divided by 20 equals 50, and that can be expressed in a ratio of 50 to 1. Essentially what it&#8217;s saying is, no matter what the stock price does the bond will always be worth 50 shares, so you&#8217;ll always get 50 shares, no matter what the price happens to do.<\/p>\n<p>You can also calculate the <b>market worth<\/b> (the bond price) is the number of shares times the conversion price. Basically, the thing to remember about convertible bonds is they are corporate bonds with a lower interest yield by themselves, but inside them is this capacity (or ability) to be traded (or exchanged) for common stock in the issuing company.<\/p>\n<p>That can provide a good upside, It helps both the corporation, in terms of having people essentially remove the debt from the books by converting their bonds into stocks and things like this; and of course, if the company does well, then the person with the bond converts it to stock and they get to benefit in the company&#8217;s progress as well.<\/p>\n<p>Convertible bonds are bonds that can be converted (or traded) for a particular set number of common stock in the company using this equation here: the par price divided by the conversion price (which is set in the bond) giving you the number of shares.<\/p>\n<\/div>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>What is a Convertible Bond?<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"open","template":"","meta":{"footnotes":""},"class_list":{"0":"post-961","1":"page","2":"type-page","3":"status-publish","5":"page_type-video","6":"page_domain-business"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.mometrix.com\/academy\/wp-json\/wp\/v2\/pages\/961","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mometrix.com\/academy\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.mometrix.com\/academy\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.mometrix.com\/academy\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mometrix.com\/academy\/wp-json\/wp\/v2\/comments?post=961"}],"version-history":[{"count":3,"href":"https:\/\/www.mometrix.com\/academy\/wp-json\/wp\/v2\/pages\/961\/revisions"}],"predecessor-version":[{"id":52008,"href":"https:\/\/www.mometrix.com\/academy\/wp-json\/wp\/v2\/pages\/961\/revisions\/52008"}],"wp:attachment":[{"href":"https:\/\/www.mometrix.com\/academy\/wp-json\/wp\/v2\/media?parent=961"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}