SIE practice questionhardCallable/Putable Bonds
If interest rates fall sharply, which bond feature most likely disadvantages investors?
- AConversion feature
- BPut feature
- CCallable feature✓ Correct answer
- DZero-coupon structure
Explanation
Why C — Callable feature
Call provisions allow issuers to redeem bonds when rates fall, cutting off high coupons for investors. Puts and conversion can benefit investors in this scenario.
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