To sell a callable bond, the issuer must pay a higher interest rate than on a noncallable bond ofequal risk.

Name: To sell a callable bond, the issuer must pay a higher interest rate than on a noncallable bond ofequal risk.
Brand: Quizplus
Rating: 4.8 (46 reviews)

Question

Quizplus · Accepted Answer

This is true because the option for the issuer to call the bond is beneficial to them, allowing them to refinance at a lower rate in the future if interest rates drop. To compensate for this option, investors require a higher yield upfront on callable bonds.

To Sell a Callable Bond, the Issuer Must Pay a Higher