If a company's bonds are callable,

Question

Quizplus · Accepted Answer

If a company's bonds are callable, the issuing company has the right to retire the bonds before maturity. This is likely to happen if the interest rate on the bonds is higher than the current market rate. In such a scenario, the company can save money by issuing new bonds at a lower interest rate and using the proceeds to retire the existing bonds. Thus, option B is the best choice. Option A is incorrect as it suggests that the buyer of bonds has the right to retire the bonds, which is not true. Option C is incorrect as callable bonds can remain outstanding until maturity if the company decides not to call them. Option D is incorrect as the redemption price is usually specified in the bond issue contract.

If a Company's Bonds Are Callable