If a ﬁrm retires or extinguish a debt issue before maturity the speciﬁc amount they pay is:
A)the amortization amount.
B)the call price.
C)the sinking fund amount.
D)the spread premium.
E)None of the above.

Question

Quizplus · Accepted Answer

The specific amount that a firm pays to retire or extinguish a debt issue before maturity is called the call price. This is because the issuer of the debt has the right to "call" the debt and buy it back from the investors before the maturity date. The call price is usually higher than the face value of the debt to compensate investors for the early repayment.

If a ﬁRm Retires or Extinguish a Debt Issue Before