Which of the Following Statements Regarding Callable Bonds Is FALSE

question 48

Multiple Choice

Which of the following statements regarding callable bonds is FALSE?

• A)The holder of a callable bond faces reinvestment risk precisely when it hurts: when market rates are lower than the coupon rate she is currently receiving.
• B)When yields have risen,the issuer will not choose to exercise the call on the callable bond.
• C)The issuer will exercise the call option only when the prevailing market rate exceeds the coupon rate of the bond.
• D)A callable bond is relatively less attractive to the bondholder than the identical non-callable bond.

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Definitions:

Obedience

The act of following orders or directions from an authority figure, often without question.

Perceived Authority

The extent to which an individual is viewed by others as knowledgeable or powerful in a particular area or situation, affecting their influence over others.

Ethics

A branch of philosophy that deals with questions about morality, including the rightness and wrongness of actions, virtues and vices, and good and evil.

Aggression

Behavior that is intended to harm or injure another being who is motivated to avoid such treatment.