3. Convertible bonds, warrants, and other exotic bond features Aa Aa As the name suggests, convertible bonds allow the owner the option to convert the bonds into a fixed number of shares of common stock. Which of the following are most likely to have higher yields? Convertible bonds Nonconvertible bonds Consider the case of an investor, Nazim: Nazim wants to include putable bonds in his investment portfolio. Nazim is likely to put the bonds when: O He has reinvestment options with higher yields He has reinvestment options with lower yields Nazim also recently bought bonds with a clause stating that interest will be paid based on the inflation rate. When the inflation rate increases, the interest on the bonds will also increase. Nazim has invested in