Question #93

Reading: Reading 27 Valuation and Analysis of Bonds With Embedded Options

PDF File: Reading 27 Valuation and Analysis of Bonds With Embedded Options.pdf

Page: 29

Status: Unattempted

Part of Context Group: Q93-94 First in Group
Shared Context
- Wall is a little confused over the relationship between the embedded option and the callable bond. How does the value of the embedded call option change when interest rate volatility increases? The value: A) may increase or decrease. B) increases. C) decreases.
Question
Wall wonders how the value of the callable bond changes when interest rate volatility increases. How will an increase in volatility affect the value of the callable bond? The value:
Answer Choices:
A. may increase or decrease
B. decreases
C. increases
No explanation available for this question.
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