A call provision attached to a corporate bond issue
A) will require that the bond be recalled for its par value.
B) typically raises the price of the bond.
C) provides the corporation with refunding flexibility.
D) also requires the bond to be convertible.

Question

Quizplus · Accepted Answer

A call provision attached to a corporate bond issue provides the corporation with refunding flexibility, meaning they can recall the bond before its maturity date and issue new bonds with lower interest rates, thereby saving money on interest payments. It does not require the bond to be recalled for its par value (A), typically raise the price of the bond (B), or require the bond to be convertible (D).

A Call Provision Attached to a Corporate Bond Issue