If the holder of a bond can demand redemption of the bond at a predetermined price at a set time in the future, the bond has a(n) ______________ option.
A) call
B) put
C) conversion
D) extension
E) exchange

Question

Quizplus · Accepted Answer

A put option on a bond allows the holder to demand redemption of the bond at a predetermined price at a set time in the future. This gives the bondholder the right, but not the obligation, to sell the bond back to the issuer at a specified price before maturity, providing a potential safeguard against falling bond prices.

If the Holder of a Bond Can Demand Redemption of the Bond