Briefly discuss how a convertible security can offer a “floor” value below which an investor can protect his investment.

DISCUSSION:
1. Briefly discuss how a convertible security can offer a “floor” value below which an investor can protect his investment (pp. 27-28)

2. Explain why the rates offered by convertible securities are generally lower than those available on nonconvertible issues of similar quality (p. 29)

3. Tell how profits and losses on a preferred stock are treated (p. 29)

4. Discuss the major advantages of an investor who buys a “stock purchase warrant” and a nonconvertible bond (pp. 27-28)