CONVERTIBLE BOND – A bond having a fundamental feature that changes in a prescribed manner at a future date. For example, a tax-exempt bond initially offered as a capital appreciation bond or zero coupon bond may, at a date and rate stated at the time of issuance, convert to a current interest paying bond. Another example is a taxable exchangeable bond. Variable rate bonds having various interest rate modes generally are not referred to as convertible bonds. See: TAXABLE EXCHANGEABLE BOND.