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Monday, July 4, 2011

Disadvantages of Convertible Bonds

Convertible bond is a debt security that can be converted into the common stock of the issuing company at a later date, subject to certain restrictions. This type of investment can offer some disadvantages / drawbacks to the issuers and investors, such as the follows:

1) A convertible bond is riskier. If the issuing company goes into bankruptcy, the holder of the bond has a lower priority claim

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