Question
When speaking of pros and cons of convertible bonds to a bond investor, and they favor buying convertibles over straight bonds and the times they
When speaking of pros and cons of convertible bonds to a bond investor, and they favor buying convertibles over straight bonds and the times they favor buying straight bonds over convertibles
Some conditions that I would favor buying convertible bonds over straight bonds are that convertible bonds can be converted into equity or cashed in. This option is not available for straight bonds. Convertible bonds may also have or offer higher return expectancy than straight or conventional bonds. Some conditions that I would favor buying straight bonds over convertible bonds are that they cannot be forced to be converted or cashed in on, unlike convertible bonds. Since straight bonds tend to have higher fixed interest payments, as a bond issuer this would be something that would also be favorable for this type of bond verses convertible bonds. The type of bond that an investor chooses depends on the goal that the investor has, although the goal for most investors is to obtain a steady stream of income.
What are the main reasons investors favor buying convertibles over straight bonds? are there any times straight bonds are better for them?
When should I choose convertible bonds over straight bonds and vice-versa? Why?
Please provide a thorough explanation and samples. Thank you!
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