A bond that is callable has a chance of being retired earlier than its stated term to maturity.Therefore, if the yield curve is upward sloping, an outstanding callable bond should have a lower yield to maturity than an otherwise identical noncallable bond.

Question

Quizplus · Accepted Answer

Callable bonds typically offer a higher yield to maturity compared to noncallable bonds to compensate investors for the risk of the bond being called away before maturity, especially in an environment where the yield curve is upward sloping.

A Bond That Is Callable Has a Chance of Being