A convertible bond in which the price of the underlying stock must reach a certain level before conversion is allowed. All convertible bonds have a conversion price, that is, the price one pays in order to exchange the bonds for stocks. Contingent convertible bonds, however, have a second, higher price that the underlying stock must meet before a bondholder is allowed to convert. For example, the conversion price for a convertible bond may be $10 per share, but if the stock price is below $20 per share, the investor may not convert the bond.
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Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.