A call feature allows the corporation to buy outstanding bonds from current bondholders before the maturity date. It is a common feature in many corporate bonds, giving the issuing company the flexibility to manage its debt and potentially reduce interest expenses. The other answer choices are not accurate descriptions of a call feature.

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A Call Feature

Question 110

Multiple Choice

A call feature

A) Allows bondholders to convert their bonds to a specified number of shares of common stock.
B) Is not available for corporate bonds.
C) Allows the corporation to buy outstanding bonds from current bondholders before the maturity date.
D) Is sold by companies with a poor earnings history.
E) Is used in connection with leveraged buyouts.

Correct Answer: