Juan recently invested in 15-year Bellandro Bay Brewery bonds paying 6% interest annually,with a maturity date of 2020.The bonds are callable in 2015.If interest rates go down to 4.5% in the year 2015,the brewery is likely to:

Question

Quizplus · Accepted Answer

If interest rates go down, the brewery is likely to exercise the call option and redeem the bonds early because they can issue new bonds at a lower interest rate, thus saving them money on interest payments.

Juan Recently Invested in 15-Year Bellandro Bay Brewery Bonds Paying