Convertible securities allow the holder to convert them into what?

Convertible securities are financial instruments, typically bonds or preferred stocks, that give the holder the right to convert them into a predetermined number of shares of common stock. This feature allows investors to participate in the equity upside of the issuing company, making them an attractive option for those seeking potential capital appreciation.

The conversion benefits the holder by allowing them to take advantage of the performance of the company's stock while initially enjoying the security features of fixed income investments. If the company's stock price rises above the conversion price, converting the securities can lead to significant profit since the holder can acquire shares at a lower price than the market value.

In contrast, options like cash, other bonds, or debt obligations do not accurately reflect the primary purpose of convertible securities, which is to provide an avenue for shareholders to move from a fixed income status to an equity status in the company. Thus, the correct answer distinctly highlights the essence of convertible securities and their designed utility within investment portfolios.