Which of the following best describes convertible debt?

Convertible debt is best described as a loan that can be converted into equity. This financial instrument allows investors to lend money to a company, typically in the form of a bond or note, with the option to convert that loan into shares of the company's stock at a later date, usually under predetermined conditions. This feature makes convertible debt an attractive option for both borrowers and investors because it provides immediate funds to the company while offering the potential for equity ownership to investors if the company performs well.

The conversion aspect differentiates convertible debt from traditional loans or debt instruments. Furthermore, it commonly comes with features such as a lower interest rate compared to standard debt due to the added value of the conversion option. This interplay between debt and equity financing provides a unique blend of capital structure that can appeal to both the company seeking financing and the investors looking for upside potential in the company's equity.