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

A callable bond typically has a higher yield to maturity than a noncallable bond to compensate investors for the risk that the bond may be called before maturity, especially when the yield curve is upward sloping.

Bond That Is Callable Has a Chance of Being Retired