The call feature of a long-term bond _______.
A) is an optional retirement provision
B) states the call price
C) allows the issuer to replace a high coupon bond with a lower coupon bond
D) All of these are correct

Question

Quizplus · Accepted Answer

The call feature of a long-term bond is indeed an optional retirement provision that allows the issuer to retire the bond before its maturity. It specifies the call price, which is the price at which the bond can be redeemed before maturity. This feature is often used by issuers to replace a high coupon bond with a new issuance at a lower coupon rate, especially in a declining interest rate environment, making all the provided options correct.

The Call Feature of a Long-Term Bond _______