Final answer:
A convertible bond is a type of debt security that can be converted into equity in the company. It combines features of both bonds and stocks, differing from regular bonds by giving investors the option to convert into stock. The correct option is a. one which may be exchanged for equity in the company.
Step-by-step explanation:
A convertible bond is a type of debt security that can be converted into a predetermined number of equity shares of the issuing company.
It has all the elements of a standard bond, such as a face value, coupon rate, and maturity date. However, unlike regular bonds, convertible bonds offer the investor the right to convert their bond into equity, typically shares of stock, under certain conditions, thereby potentially participating in the company's equity appreciation.
They do not come with voting rights associated with equity shareholders and are different from bonds that may have a floating rate but no established cap rate. The correct option is a. one which may be exchanged for equity in the company.