Bonds A and B have the same coupon, maturity and risk rating. Bond A is a callable bond priced at $975 and Bond B is an option-free bond priced at $999. An investor believes that interest rates will change only slightly over the next six months, but Bond A is at least 60 basis points away from being called. The most likely reason for the difference in prices is that the embedded option in Bond A: A. B. C. Increases the default risk of the issue. Makes the bond worth more to the bondholder. Limits the capital gains that may accrue to bondholders. A portfolio manager enters into a repurchase agreement and provides bonds as collateral in return for financing. If liquidity in the repo market declines, the portfolio manager can expect a: A. B. C. Lower cost of funds and increasing portfolio returns. Higher cost of funds and increasing portfolio returns. Higher cost of funds and decreasing portfolio returns. An investor expecting a narrowing yield spread between the 20-year Treasury and a 20-year BBB-rated corporate bond would most likely expect the economy to: A. B. C. Expand. Contract. Remain stable