Callable bonds require the issuer to borrow money at a higher interest rate when rates rise.

Question

Quizplus · Accepted Answer

Callable bonds typically have a call option that allows the issuer to redeem the bonds before maturity. This call option is triggered when interest rates fall, allowing the issuer to borrow money at a lower interest rate. However, if interest rates rise, the call option is less likely to be exercised and the issuer may need to borrow money at a higher interest rate, which would increase their borrowing costs.

Callable Bonds Require the Issuer to Borrow Money at a Higher