A bond's call feature may be exercised if
1. the yield to maturity exceeds the current yield
2. the yield to maturity is less than the current yield
3. interest rates have risen
4. interest rates have fallen
A)1 and 3
B)1 and 4
C)2 and 3
D)2 and 4

Question

Quizplus · Accepted Answer

A bond's call feature is typically exercised by the issuer when interest rates have fallen, allowing them to refinance the debt at a lower interest rate. This situation corresponds to when the yield to maturity is less than the current yield, as lower interest rates generally increase bond prices, reducing their yields to maturity.

A Bond's Call Feature May Be Exercised If