Question

On January 1, Year 1, Greenbriar Corporation issues callable bonds at face amount that pay 8% interest. The company is most likely to call the bonds if the market interest rate.

Answer 1

Moves in favor of the company or falls below 8%

Step-by-step explanation:

Callable bonds allow the issuers to to pay off the bond debt early as they are not usually bound by the maturity dates. They are issued in anticipation that market rate in future will benefit the company and make external borrowing from other means like banks a lot more favorable. Therefore, if the bonds are called by Greenbriar Corporation it is likely that market interest rates have fallen below the interest rates offered by these bonds of 8%.

Hope that helps.