Which one of the following conditions will typically be present when a firm calls a bond prior to maturity?
A) The firm is in poor financial health.
B) Interest rates have risen substantially since the bond was issued.
C) Interest rates have fallen substantially since the bond was issued.
D)The call option is ready to expire.

Question

Quizplus · Accepted Answer

When interest rates have fallen substantially since the bond was issued, a firm may choose to call the bond prior to maturity in order to reissue the bond at a lower interest rate. This allows the firm to save money on interest payments over the remaining life of the bond.

Which One of the Following Conditions Will Typically Be Present