Answer:
Correct option is D
Explanation:
Required yields falls.
Answer: (d) required yields fall.
Explanation
Higher Coupon rate Callable bonds are at risk of being recalled by an issuer when required yields fall.
Usually, the new Issuer would have to pay a rate that mirrors the current interest rate. If it is high, their payments will be high, low and vice versa.
They figured though that instead of paying high interest even when interest is low, they could just recall the bond and reissue another one that reflects a low interest rate.
This is therefore now a very widespread practice.
If Required Yields fall, there is a chance of the bond being recalled.
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