Bonds issued giving the holder the option of exchanging the bonds for capital stock of the corporation are called convertible bonds. Convertible bonds give the bondholder the right to convert their bonds into a predetermined number of shares of the company's stock at a specified conversion ratio or price within a certain time frame. This provides the bondholder with the opportunity to participate in the potential upside of the company's stock.
Bonds issued with the option for the holder to exchange them for capital stock of the corporation are called convertible bonds.
