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 one with a lower coupon bond
D)all these are correct

Question

Quizplus · Accepted Answer

The call feature of a long-term bond allows the issuer to retire the bond before maturity by paying the call price. This provision is usually included in bonds to allow the issuer to replace high coupon bonds with lower coupon bonds, thus reducing their borrowing costs. It is also an optional retirement provision for the issuer. Therefore, all the given options are correct.

The Call Feature of a Long-Term Bond