A bond that is callable has a chance of being retired earlier than its stated term to maturity. Therefore, if the yield curve is upward sloping, an outstanding callable bond should have a lower yield to maturity than an otherwise identical noncallable bond.

A. True

B. False

Answer: false

Explanation: investors of callable bond are compensated with attractive interest, It benefit the issuer. Callable bond are also called redeemable bond, it is a bond that is redeemed or paid off by the issuer prior to date the bond mature.

It is a false statement, that if the yield curve is upward sloping, an outstanding callable bond should have lower yield to maturity than noncallable bond.