Business and Personal Finance Dictionary

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• CONVERTIBLE BOND
  
  Convertible bonds are corporate bonds that you can convert into common stock of the company that issues them rather than redeeming them for cash when they mature. The details governing the conversion, such as the price of the stock, are set when the bonds are issued. These bonds have a double appeal for investors concerned about volatility and high stock prices: Their prices go up if stock prices go up but usually drop less than the underlying stock price if that price should fall. And while convertible bonds typically provide lower yields than regular bonds, they provide higher yields than the underlying stock. You can buy convertibles through a broker or choose a mutual fund that invests in them.
  
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