CONVERTIBLES Meaning and
Definition
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Convertibles refer to a type of financial instrument or security that can be converted into another type of security under certain predefined conditions. These conditions are typically specified in the terms of the security issuance. Convertibles are primarily associated with convertible bonds, which are fixed-income debt instruments that can be converted into equity (common stock) at a specified conversion price or ratio. However, the term "convertibles" can also refer to other securities, such as convertible preferred stock or convertible securities issued by mutual funds or exchange-traded funds.
The conversion feature of convertibles provides investors with the potential to benefit from the appreciation in the underlying equity of the issuing company. In this sense, convertibles can offer a hybrid characteristic, combining features of both debt and equity, as they have a fixed-income component with the potential for capital appreciation. Convertibles are commonly used by companies to raise capital and offer investors an alternative to traditional debt securities or equity shares.
The conversion feature of convertibles gives investors the flexibility to convert their holdings into equity when the issuer's stock price reaches a certain level, providing potential upside potential. However, if the stock price fails to reach the specified conversion price or ratio, holders of convertibles retain their original fixed-income positions. The attractiveness of convertible securities lies in their potential for capital appreciation while still offering regular fixed-income payments. This feature makes convertibles an interesting investment option for investors looking for a balance between income and growth potential.
Top Common Misspellings for CONVERTIBLES *
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Other Common Misspellings for CONVERTIBLES
Etymology of CONVERTIBLES
The word "convertibles" has its origins in the Latin language. The term derives from the Latin verb "convertere", which means "to turn around" or "to change". In English, "convert" refers to the act of changing or transforming something from one form or state to another. The term "convertible" specifically refers to something that is capable of being changed, altered, or transformed. In the context of automobiles, a "convertible" is a type of car with a removable or retractable roof, allowing it to be transformed from an enclosed vehicle into an open-air one.
Similar spelling words for CONVERTIBLES
- conversational,
- conversance,
- converted,
- convergence,
- Converting,
- converter,
- conversant,
- conversancy,
- conversation,
- conversely,
- convertor,
- conversion,
- convertibility,
- convertible,
- convergent.
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