3 What is NOT a disadvantage of a call provision for the bon

3. What is NOT a disadvantage of a call provision for the bondholder?
a. the cash flow pattern of a callable bond is not known with certainty.
b. the investor is exposed to reinvestment risk.
c. the capital appreciation potential of a bond will be reduced.
d. A & B only
e. None of the Above

Solution

Answer: Option [e] None of the above.

All the three options - a, b and c are valid disadvantages of an investor holding a bond with a call option provision.