Series 7 Exam Prep 25, Callable, Putable, and Convertible Bonds
This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams.
In this episode you will learn:
- That callable bonds benefit the issuer, especially in a falling interest rate environment, and typically come with a higher coupon to compensate investors for call risk.
- How to calculate the yield to call (YTC) and why it's the relevant yield to quote for a premium bond, representing the 'yield to worst'.
- That puttable bonds benefit the investor, particularly when interest rates are rising, and therefore offer a lower coupon.
- How to determine a convertible bond's conversion ratio by dividing the par value by the conversion price.
- How to calculate the parity price of both the stock and the bond to identify potential arbitrage opportunities.
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