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Financial Goal My financial goal is to put my kids through college To do this I must find a secure convertible bond This would mean the conversion ratio varies from bond to bond Many times an indenture will tell me how many shares of stock the bond will convert into For example Ill say the convertible is in 20 shares So the ratio of that are 20 to 1 But its not always that easy the indenture might state the conversion price which is price per share that the company will trade their share of stocks for bonds If the stock were to split 2 for 1 and the conversion ratio was 20 to 1 prior to the split after the split the conversion ratio would be 40 to 1 A stock dividend would also have the same effect A stock split would also reduce the conversion price Because convertible bonds have a little something extra the right to convert to common stock that little something extra costs the bondholder The bond will usually carry a slightly lower interest rate If the stock price rises the bond price will also rise Since most convertible bonds are also callable the company can force the bondholders to convert the bonds to common stock by calling the bonds This I understand can help me reach an outstanding maturity year plus low interest rates for the future If the companys stock declines to a price which makes the convertible feature of the bond worthless as long as the company sophisticated the bond will trade based on its yield like any other bond There is a price level to which a bond will fall and fall no further as long as the company can pay its interest and the principal upon maturity I feel this type of bond will help me tremendously in the future ahead
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