CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

An option free bond is trading at $105. Which price is LEAST LIEKLY for a callable bond with the same maturity and credit risk?

A. $102
B. $104
C. $106
Correct Answer: C

The value of a callable bond for investors is lower than the value of an option-free bond, because the option is granted to the issuer. A callable bond should therefore sell for less than an otherwise similar straight bond.

User Contributed Comments 1

User Comment
pingpong Investors get a discount for a callable bond. Investors are willing to pay a premium for a putable bond.
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