Which of the following statements about step-up bonds is NOT true? ...
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Finance
Which of the following statements about step-up bonds is NOT true?
The relative value of a step-up bond will depend on the holding period, the coupon and the expectation of future interest rates.
When the bond steps-up (coupon increases), the potential for the issuer to exercise the bonds call option also increases.
It is possible that when the bond steps-up, the increase in coupon may not keep up with prevailing interest rates.
The price of a step-up bond is determined in part by the credit risk of the issuer, the prevailing level of interest rates and the value of the embedded call option.
All of the above are true about step-up bonds.
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