A. contributed bonds
B. non-callable bonds
C. callable bonds
D. discounted bonds
✅ The correct answer is option B.
Value of option issued to call debt is subtracted from rate of return on callable bond to calculate rate of return on non-callable bonds. A noncallable security is a financial security that cannot be redeemed early by the issuer except with the payment of a penalty. The issuer of a noncallable bond subjects itself to interest rate risk because, at issuance, it locks in the interest rate it will pay until the security matures.
Value of option issued to call debt is subtracted from rate of return on callable bond to calculate rate of return on non-callable bonds. A noncallable security is a financial security that cannot be redeemed early by the issuer except with the payment of a penalty. The issuer of a noncallable bond subjects itself to interest rate risk because, at issuance, it locks in the interest rate it will pay until the security matures.