Callable and Convertible Features

What this video covers

• Who benefits from a call feature (the issuer, not the investor) and why exam writers love flipping this relationship
• Why issuers call bonds only when interest rates fall, using the mortgage refinancing analogy to lock in the logic
• How reinvestment risk works for callable bond investors and why callable bonds carry higher yields than non-callable bonds
• Why convertible bonds have lower yields than comparable non-convertible bonds, since the investor holds the conversion privilege
• The conversion ratio formula: par value divided by conversion price, and why reversing the numerator and denominator is a classic exam trap
• When conversion is economically attractive (stock price above conversion price) and why the bond floor protects investors when the stock drops
• Why call protection restricts the issuer's right to call but never restricts the bondholder's right to convert