Question

Which of the following type(s) of bonds have embedded options?

Group of answer choices

a. Zero-coupon bonds

b. Both callable bonds and convertible bonds

c. Convertible bonds

d. Callable bonds

Answer 1

Answer:b.Both Callable and convertible Bonds

Embedded options are part of a financial security and allows the investor or issuer to take action about the financial security in the future.Callable bonds refer to bonds that gives the issuer to retire the bonds before their maturity.Convertible bonds refer to a bond which allows the investors(bondholders) to convert their bonds into a specified number of shares.

Other Option explained:

Zero Coupon Bond.

False Since zero coupon bond does not come with an option embedded to it so this option is incorrect.