A retractable bond pays a lower interest rate,all else equal.

Question

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A retractable bond typically pays a lower interest rate because it provides the issuer with more flexibility to redeem the bond before maturity. This is because the bond can be "retracted" or redeemed before the end of its term at the option of the issuer. As a result of this additional flexibility, investors generally demand a lower yield or interest rate on retractable bonds.

A Retractable Bond Pays a Lower Interest Rate,all Else Equal