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Just curious, how does this differ with 'junk bonds'?



'junk bonds' are bonds with a high interest rate because of poor credit quality.

convertible bonds basically have an equity option attached, so the interest rate paid by the issue is lower than what it would be otherwise (because the buyer is getting an option).

Often it is low grade companies that issue convertible bonds (to keep the interest expense they pay down), but it doesn't have to be. Investment grade companies can issue converts as well.




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