Convertible bonds are a type of debt security that allows investors to convert their bonds into a predetermined number of shares of the issuing company's stock. This feature provides the potential for capital appreciation if the company's stock price rises, making them attractive to investors who want both fixed income and equity exposure. These bonds typically offer lower interest rates compared to regular bonds because of the added conversion option. Investors benefit from the safety of fixed interest payments while also having the opportunity to participate in the company's growth if they choose to convert their bonds into shares.