What Is a Characteristic of a Callable Bond

question 120

Multiple Choice

What is a characteristic of a callable bond?

• A) The bondholder has the right to sell an option on the bond.
• B) The issuing company is likely to retire the bonds before maturity if the bonds are paying 8% interest while the market rate of interest is 4%.
• C) The bonds are never allowed to remain outstanding until the maturity date.
• D) The investor never knows what the redemption price will be until the bonds are actually called.

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Definitions:

Interest Rate

The percentage of a loan that is applied as interest for the borrower, usually expressed as an annual rate of the remaining loan balance.

Money Supplied

A rephrased definition: The total volume of money provided or injected into the economy by various sources, including but not limited to monetary authorities.

Real GDP

The inflation-adjusted value of all goods and services produced within a country's borders in a specific time period, reflecting the actual growth of an economy.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, usually expressed as a percentage of the principal.