1 Suppose that Verizon issues two bonds with identical coupo

1) Suppose that Verizon issues two bonds with identical coupon rates and maturity dates. One bond is callable, however, whereas the other is not. Which bond will sell at a higher price? Why?

Solution

A non callable bond sells at a higher price than a callable bond because a callable bond can be bought back by the company at a call price that is less than the true value of the bond.