The issuer pays periodic interest until the maturity date, according to maturity date the issuer can convert the bond into equity shares at a predetermined price or redeem them from the face value. A convertible bond is an elastic kind of finance offered to a corporation. A convertible bond grants the investor a kind of hybrid security; that is, it makes payments in interest for a bond while at the same time making the possibility of owning stock real. The conversion ratio of this bond determines how many shares of stock you would get from converting one bond. For instance, 5:1 means that one bond would convert to five shares of common stock.