Which one of the following statements is correct?
A) A convertible bond will be worth less than a similar non-convertible bond.
B) A callable bond will be worth less than a similar non-callable bond.
C) A callable bond will be worth more than a similar convertible bond.
D) Warrants are always worth more than convertible bonds.

Question

Quizplus · Accepted Answer

A callable bond gives the issuer the right to call back the bond before maturity, which reduces the bondholder's potential returns. Therefore, a callable bond will be worth less than a similar non-callable bond. The other statements are not necessarily true.

Which One of the Following Statements Is Correct