SIE practice questionmediumPuttable bonds
Why might an investor choose a puttable bond?
- ATo have the option to return the bond to the issuer when interest rates rise✓ Correct answer
- BTo earn the highest possible yield
- CTo eliminate inflation risk
- DTo guarantee conversion to equity
Explanation
Why A — To have the option to return the bond to the issuer when interest rates rise
Put options protect against price declines when rates rise; puttable bonds typically offer lower yields and do not eliminate inflation or guarantee equity conversion.
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