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Question:

Consider the following statements:
Statement 1: The option embedded in a putable bond is more likely to be exercised by the issuer when interest rates rise.
Statement 2: If a bond is sold between coupon payment dates, accrued interest is due to the buyer.
Which of the following is most likely?

A Both statements are incorrect.
Explaination

The embedded option in a putable bond is likely to be exercised by the investor when interest rates rise.
If a bond is traded between coupon payment dates, accrued interest is due to the seller