After owning a Maplewood Company bond for five years, Michelle exercised an option that allowed her to exchange her bond for 20 shares of the company stock. Michelle owned a

B. convertible bond.

Explanation:

A Convertible bond is as the name implies, a fixed income asset. However, it also has a hybrid function in that it can be converted into shares or equity in the company that issued the bond.

In the agreement, when this can be done is up to the bondholder but there might be only specific times in which they can convert the bond. As a result of its ability to be convertible to stock, the price of this bond is quite susceptible to interest rate changes as well as the price of the stock that it can be converted into. If for instance interest rates fall or the stock price rises, these are both incentives to convert the bonds to stock.

Michelle was able to exchange her bond for shares so what she owned was a convertible bond.

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