Call options are also frequently attached to bonds, making them callable at the option of the issuer. Consider a firm that just issued two sets of bonds: One is callable, has an 8% coupon rate, 10 years to maturity, and can't be called in the first five years; the second is non-callable, has an 8% coupon rate, 10 years to maturity, and is identical to the first bond in every way except for the call option. Suppose the non-callable bonds are sold for $1,000 each. Will the callable bonds sell for more or less? Who "purchases" the option in this case and who "sells" it?

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The Answer of Call options are also frequently attached to bonds, making them callable at the option of the issuer. Consider a firm that just issued two sets of bonds: One is callable, has an 8% coupon rate, 10 years to maturity, and can't be called in the first five years; the second is non-callable, has an 8% coupon rate, 10 years to maturity, and is identical to the first bond in every way except for the call option. Suppose the non-callable bonds are sold for $1,000 each. Will the callable bonds sell for more or less? Who "purchases" the option in this case and who "sells" it?

Call Options Are Also Frequently Attached to Bonds, Making Them