Investors who buy bonds that are callable

Question

Quizplus · Accepted Answer

Investors who buy bonds that are callable risk reinvesting at lower rates if called. When a bond is called, the issuer pays back the remaining principal and stops making interest payments, which can limit the potential return for the investor. Additionally, if interest rates have decreased since the bond was issued, the investor may have difficulty finding a similarly attractive investment to reinvest in. However, callable bonds may offer higher yields in exchange for the added risk of being called, making them potentially attractive to investors who are willing to take on this risk.

Investors Who Buy Bonds That Are Callable