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Basic Question 0 of 11
Two bonds with identical maturity, coupon size and default risk are selling at par value. The first bond is an option-free bond. The second bond is a callable bond. In response to a 100 basis point decrease in required return:
B. the price of the second will increase by more than the price of the first.
C. the price of the first will decrease by more than the price of the second.
A. the price of the first will increase by more than the price of the second.
B. the price of the second will increase by more than the price of the first.
C. the price of the first will decrease by more than the price of the second.
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Learning Outcome Statements
explain the calculation and use of option-adjusted spreads;
explain how interest rate volatility affects option-adjusted spreads;
CFA® 2026 Level II Curriculum, Volume 4, Module 28.