In a perfectly efficient market the management of a bond-issuing company should be indifferent between issuing callable or non-callable securities.

Question

Quizplus · Accepted Answer

In a perfectly efficient market, the price of a callable bond will be equal to the price of a non-callable bond with the same maturity and coupon rate. This is because investors will be indifferent between the two types of bonds, since they will be able to sell the callable bond at any time if interest rates rise.

In a Perfectly Efficient Market the Management of a Bond-Issuing