Adriann purchased a 10-year bond. After three years paying 5 percent interest, the interest rate drops to 3 percent. Adriann is surprised when the bond issuer recalled her bond shortly after the rate drop. Adrianna had most likely purchased a ________ bond.

Question

Quizplus · Accepted Answer

Adriann had most likely purchased a callable bond, which allows the issuer to recall or redeem the bond before its maturity date, typically when interest rates drop, allowing the issuer to refinance the debt at a lower rate.

Adriann Purchased a 10-Year Bond