Asked by Ailis Galdo on Jun 05, 2024
Verified
A deferred call provision refers to:
A) The open market price of a callable bond on a certain date.
B) The seniority of callable bonds to non-callable bonds in the event of corporate default.
C) The prohibition of a company from ever redeeming callable bonds.
D) The prohibition of a company from redeeming callable bonds prior to a certain date.
E) The amount by which the call price for a callable bond exceeds its par value.
Deferred Call Provision
A clause in a bond contract that prohibits the issuer from repurchasing the bond until a specified date has passed.
Callable Bond
A type of bond that can be redeemed by the issuer before its maturity date at a specified price.
Redemption
The process by which securities or financial instruments are converted into cash or its equivalent value.
- Discern the specifics and goals of different bond provisions, including put provisions, call provisions, and protective covenants.
Verified Answer
AM
April MartinezJun 08, 2024
Final Answer :
D
Explanation :
A deferred call provision is a feature of a callable bond that prohibits the issuer from redeeming the bond before a specified date, ensuring that investors receive interest payments for a certain period.
Learning Objectives
- Discern the specifics and goals of different bond provisions, including put provisions, call provisions, and protective covenants.