Which of the following statements regarding callable municipal bonds is TRUE?
A) As interest rates rise, callable bonds trading at a premium will generally rise in value.
B) Bond call premiums generally compensate the bondholder for interest payments lost if the bond is called.
C) Noncallable bonds usually yield more than callable bonds.
D) Bonds are typically called when interest rates are rising.
Answer: B) Bond call premiums generally compensate the bondholder for interest payments lost if the bond is called.