1-You are considering purchasing five-year corporate bonds as an investment. You have a choice of terms available and chose convertible feature. How does this feature affect the bond's required rate of return? Explain.

2-Compare and contrast callable bonds with non-callable bonds

1. Convertibility options of the bond will mean that they will be offering the bondholders with additional advantage of conversion of those bonds into shares as per their discretion after a prescribed period of time, so it will be leading into a lower rate of return of these bonds because they have an additional support feature for the bondholders.

The convertible bonds will mean that they will have LOWER YIELD and they will have HIGHER SECURITY.

2. Callable bonds are those bonds which can be called by the company when they think that market rate of interest are lower, and they will be trying to capitalise upon that.

Non callable bonds are those bonds which can only be redeemed at maturity and they cannot be called by the company.

Callable bonds are having reinvestment risk whereas non callable bonds does not have any kind of reinvestment risk.

Callable bonds are offering with higher yield than that of the non callable bonds.