Asked by jazell freeman on Apr 26, 2024
Verified
A call provision grants a bond issuer the right to:
A) Change the coupon rate should market interest rates decline.
B) Call the bondholders to ask if they wish to exchange their maturing bonds for newly issued bonds.
C) Withhold interest payments provided that they notify the bond holders at least 3 months in advance.
D) Pay off the bonds prior to maturity.
E) Issue new debt which is superior to the existing debt.
Call Provision
A feature on a bond allowing the issuer to redeem the bond before its maturity date.
- Learn about the dynamics of bond call provisions and their implications for both issuers and bondholders.
Verified Answer
SP
Shilvi PatelMay 01, 2024
Final Answer :
D
Explanation :
A call provision allows the issuer to repay the bond before its maturity date, typically to refinance the debt at a lower interest rate if market conditions are favorable.
Learning Objectives
- Learn about the dynamics of bond call provisions and their implications for both issuers and bondholders.