Question
Choose the answer that best fills the blanks. The duration of a callable bond is ______ that of an otherwise comparable noncallable bond because_______. a.
Choose the answer that best fills the blanks.
The duration of a callable bond is ______ that of an otherwise comparable noncallable bond because_______.
a. less than or equal, callable bonds have limited upside price potential since the issuing firm will exercise the call option if the market price exceeds the call price
b. greater than; when bonds are called the investors gets a higher cash flow than he would would receive with the non callable bond
c. less than or equal; callable bonds have longer tenors than do otherwise comparable non callable bonds
d. equal to; the bonds are identical
e. greater than; callable bonds have no limit to their upside price potential
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