The market price of a callable bond will not generally exceed its call price, except in the case of a convertible bond.

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The market price of a callable bond typically does not exceed its call price significantly because investors anticipate that the issuer will likely call the bond if interest rates drop and the bond's price rises too much above the call price. However, a convertible bond can exceed its call price due to the added value of the conversion option into equity, which may appreciate independently of interest rate movements.

The Market Price of a Callable Bond Will Not Generally