Convertible Bonds - A Hybrid Security

In the United States, there are more than $100 billion of convertible bonds that can be converted into stock. Though somewhat more subject to price movements than regular corporate bonds, high-grade convertible bonds have from 1960 through 1994 provided a modestly better yield for investors.

Security Annual return

Convertible bonds 9.9%

(The Carmack Group)

Bonds 7.1%

(Salomon Brothers index)

Stocks 10.3%

(S & P 500)

Source: The Carmack Group