Premium Adjustable Convertible Security - PEACS

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DEFINITION of 'Premium Adjustable Convertible Security - PEACS'

A debt instrument that combines a coupon paying bond with the option to convert the bond into common stock at a set price. These are frequently described as hybrid securities because they combine features of debt and equity, converting to ordinary shares at a set date based on a pre-determined ratio.

INVESTOPEDIA EXPLAINS 'Premium Adjustable Convertible Security - PEACS'

Convertible securities like PEACS allow investors to acquire a debt instrument with rights to interest and principal payments without sacrificing the chance to participate in the company's capital appreciation. When a company does well, investors can convert the debenture into stock that has a higher value. When a company is less successful, investors can retain the bond and receive interest and principal payments. Convertible-bond mutual funds can provide a diversified investment in convertibles. These funds are meant to offer most of the upside potential of stocks while limiting downside risk.

RELATED TERMS
  1. Hybrid Security

    A security that combines two or more different financial instruments. ...
  2. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
  3. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert ...
  4. Coupon Bond

    A debt obligation with coupons attached that represent semiannual ...
  5. Upside

    The potential dollar or percentage amount by which the market ...
  6. Common Stock

    A security that represents ownership in a corporation. Holders ...
RELATED FAQS
  1. What is the difference between convertible and reverse convertible bonds?

    The difference between a regular convertible bond and a reverse convertible bond is the options attached to the bond. While ... Read Full Answer >>
  2. Where does the stock come from when convertible bonds are converted to stock?

    First, let's define convertible bonds. A unique combination of debt and equity, they provide investors with the chance to ... Read Full Answer >>
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