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What Is a Convertible Bond? How Does the Convertibility Feature

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Essay

What is a convertible bond? How does the convertibility feature affect the bond's price and interest rate?


Definitions:

Diminishing Returns

The principle stating that as one factor of production is increased while others are held constant, a point will eventually be reached where additions of the factor yield progressively smaller increases in output.

Value Added

The increase in worth of a product or service as a result of a particular stage of production or as it moves through the supply chain.

Marginal Product

The increase in output resulting from a one-unit increase in the amount of a single input used, keeping all other inputs constant.

Premium

A premium is the amount paid for an insurance policy, representing the price for the insurance coverage or the amount over the nominal value of something.

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