A call provision in a bond contract may specify that the issuing company
A)can issue the bonds at any interest rate it can entice the investors to accept.
B)must make periodic interest payments.
C)must deposit cash in the bank to be available when the bonds mature.
D)may buy back bonds from the investors.

Question

Quizplus · Accepted Answer

A call provision in a bond contract allows the issuing company to buy back bonds from investors before their maturity date. This is typically done when interest rates have fallen and the company can issue new bonds at a lower interest rate, saving money on interest payments. It gives the issuer the flexibility to adjust its debt structure according to market conditions.

A Call Provision in a Bond Contract May Specify That