A call provision on a bond:
A)Permits the corporation to redeem the bonds at a specified price.
B)Allows the corporation to revise the stated interest rate.
C)Allows the corporation to revise the maturity date.
D)Always creates the lowest price at which the bond will sell for.

Question

Quizplus · Accepted Answer

A call provision on a bond permits the corporation to redeem the bonds at a specified price. This means that the corporation can choose to buy back the bonds from investors before the maturity date, usually at a premium price. This gives the issuer flexibility in managing its debt and can be beneficial if interest rates have fallen since the bond was issued.

A Call Provision on a Bond