Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:
A) Sinking fund bonds.
B) Callable bonds.
C) Convertible bonds.
D) Serial bonds.
E) Junk bonds.

Question

Quizplus · Accepted Answer

Callable bonds are bonds that give the issuer the option to redeem them before their scheduled maturity. The stated dollar amount at which they can be retired is called the call price. Sinking fund bonds require the issuer to set aside money each year to retire a portion of the bond issue, while convertible bonds allow the bondholder to convert the bonds into a predetermined number of shares of the issuer's stock. Serial bonds are issued with different maturity dates, and junk bonds are high-risk, high-yield bonds typically issued by companies with a low credit rating.

Bonds That Have an Option Exercisable by the Issuer to Retire