If an issuer wanted to protect against a drop in interest rates, the issuer of a bond would probably include which feature?

Question

Quizplus · Accepted Answer

If an issuer wanted to protect against a drop in interest rates, the issuer of a bond would probably include a callable feature. A callable bond gives the issuer the option to redeem the bond before its maturity date. This allows the issuer to benefit from lower interest rates by calling the bond and issuing new debt at a lower interest rate. The callable feature protects the issuer from the risk of interest rates dropping and the subsequent increase in bond prices that would reduce the issuer's flexibility.

If an Issuer Wanted to Protect Against a Drop in Interest