Bonds that may be exchanged for common stock at the option of the bondholders are called

A. options.

B. callable bonds.

C. stock bonds.

D. convertible bonds.

Answer: Convertible bonds

Explanation: Convertible bonds are debt securities that are usually issued by the startup companies having no funds to initiate but high upside potential.

Convertible bonds can be converted into common stock at a specific price, on the discretion of the bondholder. These are hybrid securities, offering higher yields than common stock but lower than straight bonds.

From the above we can conclude that option D is correct.