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Firm GG is based on island G where interest rates do not change. Firm HH, however, is located in island H where interest rates change.
Firm GG is based on island G where interest rates do not change. Firm HH, however, is located in island H where interest rates change. Otherwise, firms and islands are identical. In particular, both firms have issued callable bonds with the same characteristics. If there is absolutely no connexion between islands, which callable bonds will be more expensive?
a. Those issued by Firm GG.
b. Those issued by Firm HH.
c. Both bonds have the same price.
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