Question

The coupon rate on a callable bond compared to an otherwise identical non callable bond would most likely be:-
(A) lower
(B) equal
(C) higher​

Answer 1

(C) higher​

Explanation:

• The coupon rate on a callable bond compared to an otherwise identical non callable bond would most likely be higher.
• The price of the callable bond is always lower than the price of the non callable bond because call option adds value the bond of the issuer.
• Callable bond has attractive coupon rates for the investors. The company has high yielding callable bonds at lower interest rates.
• Callable bonds pays high coupon rates to the investors compared to the non callable bonds.

To know more:

The coupon rate on a callable bond compared to an otherwise identical non callable bond would most likely be:-

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