Rule 4 of 32 in this unit2.1.2
2.1.2 Debt Instruments
SIE outline 2.1.2
You Wrote the Call
The borrower may repay at par on any day. That option sits against you, and no issuer controls it. NOT a risk the agency decides.
The trick
Common trap: Prepayment only shortens the bond. Correct: Rates fall, principal early. Rates rise, principal late. Ask the direction before you answer.
The method for this kind of question
- Section 2 is the heaviest block
Now answer
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