Corporations typically have the right to repurchase a debt issue prior to maturity at a fixed price, but only after some number of years have passed. Such debt is said to feature:
A) a sinking fund.
B) a balloon payment.
C) a redeemable-at-par provision.
D) a deferred call.

Question

Quizplus · Accepted Answer

A deferred call provision allows corporations to repurchase a debt issue prior to maturity at a predetermined price, but this option can only be exercised after a specified period has passed. This feature protects investors from having their bonds called away too early while giving the issuer flexibility to refinance the debt if interest rates fall.

Corporations Typically Have the Right to Repurchase a Debt Issue