Callable bonds often are refunded (called) when interest rates decline appreciably.The call price of the bond (approximately par and one year's coupon payment) declines to par as time passes and maturity is reached.

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Callable Bonds

Question 40

Multiple Choice

Callable bonds

A) are called when interest rates decline appreciably.
B) have a call price that declines as time passes.
C) are called when interest rates increase appreciably.
D) are called when interest rates decline appreciably and have a call price that declines as time passes.
E) have a call price that declines as time passes and are called when interest rates increase appreciably.

Correct Answer: