With respect to the company that has issued a callable bond,

Question

Quizplus · Accepted Answer

The value of a call option on a callable bond increases as interest rates decrease because the issuer would want to call the bond and issue new bonds at a lower interest rate. Therefore, the potential gain from buying a callable bond decreases as interest rates decrease, making the call option more valuable. Factors such as the stock price do not affect the value of the call option on a callable bond.

With Respect to the Company That Has Issued a Callable