Analyze the following statements about callable bonds:

I – When the yields rise the issuer decides to exercise the call option on the callable bond, because if yields rise this bond will be cheaper.

II - When the yields rise the issuer do not exercise the call option on the callable bond, because if the yields rise this bond will be cheaper.

III – When the yields fall the issuer do not exercise the call option on the callable bond, because it will be cheaper.

IV – When the yields fall the issuer exercise the call option on the callable bond, because by doing it the issuer can diminish the borrowing costs by refinancing.

Select the alternative in which all statements are correct:

I and III

II and IV

I and IV

II and III

Answer rating: 100% (QA)

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