Convertible securities are attractive because of their downside protection characteristics as well as upside potential.

Question

Quizplus · Accepted Answer

Convertible securities, such as convertible bonds or preferred stock, provide downside protection in the form of a guaranteed return of principal and interest payments. At the same time, they also offer upside potential as their conversion feature allows investors to convert their securities into common stock and benefit from any increase in the stock price.

Convertible Securities Are Attractive Because of Their Downside Protection Characteristics