JPSem

As rates fall the price of the bond rises up to a point (Call Price). The value of the call option actually increases once you pass the call price . The value of the option is the difference between the call price and the price of the non callable bond. Remember that the call is really of value to the issuer not the bondholder.

Say a no callable bond is at 110 a similar callable bond is 105. The issuer can call the bond and refinance the debt at the new lower rate......ummm I think LOL
been studying since 8:30 I'm fried