Callable bonds are typically called when interest rates decline appreciably (A) because the issuer can refinance at a lower rate. Additionally, the call price of a callable bond often declines over time (B), making it cheaper for the issuer to call the bond as it approaches maturity.

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Callable Bonds

Question 25

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) A and B.
E) B and C.

Correct Answer: