After the call protection period, which one of the following serves as an effective upper price limit on a callable bond?

Question

Quizplus · Accepted Answer

The call price of the bond serves as an effective upper price limit on a callable bond after the call protection period. This is because the issuer can call the bond at this price and investors would not be willing to pay a higher price for the bond than the price at which the bond can be called. The present value of all future bond payments discounted at the current market rate of interest may serve as a valuation metric, but it does not restrict the price at which the bond can trade. The face value of the bond is a fixed amount and does not constrain the bond price, while the current market price of the bond or a comparable noncallable bond may be subject to market fluctuations and may not necessarily serve as an upper price limit.

After the Call Protection Period, Which One of the Following