n NISM Certifications
XV NISM Series XV
Medium

In a decreasing interest rate scenario, callable bonds are safer for the issuer. True or False?

Practice question from NISM XV Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. True

    Correct answer

  2. B

    False

Why this is the answer

Callable bonds give issuers the option to redeem bonds before maturity. When interest rates fall, issuers can refinance by calling existing bonds with higher coupons and issuing new bonds at lower rates, reducing interest costs and benefiting the issuer.

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