A company issues callable bonds and market rates then fall sharply. Th…

Question

A company issues callable bonds and market rates then fall sharply. The issuer is likely to:

Accepted Answer

D. Redeem them early

1. Cheaper borrowing is now available elsewhere.
2. The call option lets the issuer end the expensive debt.
3. So the issuer redeems them before maturity and refinances.
_Source: OpenStax Principles of Finance 2e, Chapter 10, Bonds and Bond Valuation._

Answer

Raise the coupon

Answer

Extend the term

Answer

Cancel the rating

A company issues callable bonds and market rates then fall sharply. The issuer is likely to:

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