A convertible security is almost always
A) a security that can be converted into any other type of security.
B) a debt security that can only be converted into preferred or common stock.
C) a security that can be converted into common stock at the holder's option.
D) a security that can be converted into common stock only at the option of the issuing corporation.

Question

Quizplus · Accepted Answer

A convertible security is a type of security (usually a bond) that can be converted into another type of security (usually common stock) at the option of the holder. Therefore, choice C is the correct option as it states that the security can be converted into common stock at the holder's option. Choices A and B are incorrect because they either overgeneralize the definition or provide false information regarding the types of securities that a convertible security can be converted into. Choice D is also incorrect because it limits the conversion to only the option of the issuing corporation, whereas in reality, the conversion is usually at the option of the holder.

A Convertible Security Is Almost Always