Bond A is not callable; bond B is callable. Investors will require a higher yield on bond __ and will pay ____ for the bond.
A) A; less
B) A; more
C) B; less
D) B; more

Question

Quizplus · Accepted Answer

Investors require a higher yield on callable bonds (Bond B) due to the risk of the bond being called before maturity, which limits potential gains. Consequently, they will pay less for Bond B.

Bond a Is Not Callable; Bond B Is Callable