Glossary

at the money A convertible or option whose exercise (strike) price is near the current level of the underlying stock.

basis point One one-hundredth (0.01) of a percentage point.

bond A debt security, whose initial seller (issuer) borrows money from investors. The issuer agrees to pay periodic interest and repay the full principal, typically 100 cents on the dollar (par) at maturity.

breakeven The amount of time required for the income generated by a convertible bond to offset the premium paid over the bond’s conversion value.

busted convertible A convertible bond whose underlying stock trades well below the bond’s conversion price. The result is that the security is valued similarly to regular debt because there is little chance that it will ever reach the convertible price before maturity.