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What is convertible preferred stock?

Convertible preferred stock is a type of preferred share that pays a dividend and can be converted into common stock at a fixed conversion ratio after a specified date. Convertible preferred stock is a type of hybrid security with features of both debt and equity.

What is convertible stock?

Convertible stock is a financial instrument that combines characteristics of both stocks and bonds. Essentially, convertible stock is a type of preferred stock that can be converted into a predetermined number of common shares.

Do Convertible Preferred Stockholders have to convert their shares to common stocks?

Then, if the company is doing well, investors in convertible preferred stocks can convert their stocks to common stocks and gain the benefit of the stock appreciation. If the company does poorly, convertible preferred stockholders do not have to convert their shares to common stocks.

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