A Callable Bond Will Typically Have A(n)________ Yield Than an Otherwise

question 63

Multiple Choice

A callable bond will typically have a(n) ________ yield than an otherwise identical bond without a call feature because ________.

• A)lower,the firm loses flexibility with a callable bond
• B)higher,the firm loses flexibility with a callable bond
• C)lower,the option to call a bond is valuable
• D)higher,the option to call a bond is valuable
• E)identical,the call feature is without value

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Definitions:

Equilibrium Price

The market price at which the quantity of goods supplied equals the quantity of goods demanded.

Equilibrium Quantity

The quantity of goods or services supplied that equals the quantity demanded at the market equilibrium price.

Positively Sloped

A line or curve on a graph that increases in value as it moves from left to right, indicating a direct relationship between two variables.

Negatively Sloped

A descriptor for a line on a graph that moves downwards from left to right, indicating an inverse relationship between the variables plotted.