57、For a decline in interest rates, the price of a callable bond, when compared to an otherwise identical option-free bond, will most likely rise by: A. less because the price of the embedded option falls. B. less because the price of the embedded option rises. C. more because the price of the embedded option falls. D. more because the price of the embedded option rises.
Correct answer = B
"Risks Associated with Investing in Bonds," Frank J. Fabozzi
2008 Modular Level I, Vol. 5, p. 267
Study Session 15-63-c
explain how features of a bond (e.g., maturity, coupon, and embedded options) and the level of a bond's yield affect the bond's interest rate risk
Price of a callable bond = price of an option-free bond - price of embedded call option. As interest rates decline, the price of the option-free bond rises. However, the price of the embedded call option also rises. Consequently, the price of a callable bond rises by less than the price of an otherwise identical option-free bond. | 
发表于 2008-5-27 15:45
| 
