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. Innovative Energy LLC is a start-up company that just raised $100,000 to conduct a third-party feasibility study on its business model. The company agreed to treat the $100,000 investment as debt at 10% interest rate; however, the investor has the right to exchange the debt for common stock during the company's next financing round. Which of the following terms best describes the $100,000 investment? Warrant Convertible bond 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 is in need of cash O He expects to use the cash when the bond matures