In an era of particularly low interest rates, which of the following bonds is most likely to be called?

Question

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When interest rates are low, issuers of coupon bonds may want to call their bonds that are selling at a premium (above par value) in order to refinance with new bonds at a lower interest rate, saving them money in interest payments. In contrast, zero-coupon bonds and coupon bonds selling at a discount (below par value) are less likely to be called because they provide a lower cost of borrowing for the issuer. Floating-rate bonds are unlikely to be called, since their interest payments change with fluctuating interest rates.

In an Era of Particularly Low Interest Rates, Which of the Following