单选题 How does the price-yield relationship for a callable bond compare to the same relationship for an option-free bond? The price-yield relationship is:

A. concave for low yields for the callable bond and always convex for the option-free bond.
B. concave for an option-free bond and convex for a callable bond.
C. concave for the callable bond and convex for an option-free bond.

【正确答案】 A

【答案解析】Since the issuer of a callable bond has an incentive to call the bond when interest rates are very low in order to get cheaper financing, this puts an upper limit on the bond price for low interest rates and thus introduces the concave relationship between yields and prices.