A bond that can be exchanged for a fixed number of shares of the issuing firm's stock at the bondholder's discretion is a(n) ________ bond.
A) equity
B) exchange
C) convertible
D) stock
E) market

Question

Quizplus · Accepted Answer

The bond described is a convertible bond because it has the option to be exchanged for a fixed number of shares of the issuing firm's stock at the bondholder's discretion. A stock bond would imply that the bond itself represents ownership in the company similar to owning stock, which is not the case. An equity bond is not a commonly used term in finance, and a market bond is also not a standard term. An exchange bond is a possible term, but convertible bond is more commonly used to describe this specific feature.

A Bond That Can Be Exchanged for a Fixed Number