From the corporate perspective callable bonds may have value over non-callable bonds because:
A) the corporation has the option to control market interest rates.
B) interest rates may rise prohibiting the holders from earning higher returns.
C) call prices vary inversely with the interest rates.
D) the corporation has the option to call the bond if interest rates fall.
E) the corporation has the option to call the bond if interest rates rise.

Question

Quizplus · Accepted Answer

Callable bonds give the issuing corporation the flexibility to refinance the debt at lower interest rates by calling in the existing bonds. This is advantageous when market interest rates fall, allowing the corporation to issue new bonds at the lower rate.

From the Corporate Perspective Callable Bonds May Have Value Over