I buy a 10-year callable bond that is not callable for the first 5 years and then callable at par thereafter. If interest rate volatility rises and all else remains the same, what happens to the value of my callable bond. What if I am comparing two callable bonds that are identical (10 year bonds). However Bond A is not callable for the first 3 years and Bond B is not callable for the first 5 years. 

What bond would you pay more for?

Answer rating: 100% (QA)

When interest rate volatility rises the value of a callable bond tends to decrease This is because h... View the full answer