SIE practice questionhardCallable bonds
When is a bondholder most likely to have a callable bond redeemed by the issuer?
- AWhen the issuer repurchases in the open market
- BWhen interest rates have risen significantly
- CWhen the issuer’s credit improves
- DWhen interest rates have fallen significantly✓ Correct answer
Explanation
Why D — When interest rates have fallen significantly
Issuers call bonds to refinance at lower rates when rates drop. High rates do not encourage calling; credit improvement may matter, but not as directly.
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