Asked by Ashley Tyler on Jul 08, 2024
Verified
The call premium increases as the time to maturity decreases.
Call Premium
The additional amount a bond issuer must pay over the par value if they wish to redeem the bond before its maturity date.
Time To Maturity
The remaining time until a financial instrument, such as a bond, reaches its date of redemption and the principal amount is repaid to investors.
- Comprehend the elements and objectives of bond indentures, encompassing sinking funds and call provisions.
Verified Answer
CA
Cynthia ArreolaJul 12, 2024
Final Answer :
False
Explanation :
The call premium typically decreases as the time to maturity decreases because there is less time for the underlying asset to move in a favorable direction.
Learning Objectives
- Comprehend the elements and objectives of bond indentures, encompassing sinking funds and call provisions.
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