单选题

All other things being equal, a decrease in expected yield volatility most likely increases the price of:

A、 a putable bond.
B、 a callable bond.
C、 an option-free bond.

【正确答案】 B

【答案解析】

B is correct because the price of a callable bond is equal to the value of an option-free bond minus the value of the embedded call option. A decrease in yield volatility will decrease the value of the call option and, therefore, increase the value of the callable bond.