Say a bond FV=1000, yield = 6%, coupon = 6%, and term = 10 years. This way the Present value is 1000.
Now, if the yield declines to 5%, the PV increases to 1077. Hence, why would the issuer redeem/call the bond when the yield falls? It should be other way, i,e, when the yield rises? Is not it?
Can anyone explain with a practical example?