CFA Practice Question

There are 764 practice questions for this topic.

CFA Practice Question

Callable bonds exhibit negative convexity at low yields because ______

A. the coupon rate is lower than the yield, and the market price is controlled by the call price.
B. the coupon rate is higher than the yield, and the call as an option becomes valuable to the issuer.
C. callable bonds cannot exhibit positive convexity.
D. the bondholder will always receive the call price at maturity no matter what the yield is.
Correct Answer: B

User Contributed Comments 1

User Comment
kalps and therefore price increase will be capped in terms of it can only increase to a certain amount until the option is exercised by the issuer
You need to log in first to add your comment.