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 when it retires or extinguishes a debt issue before maturity is known as the call price. This is the price that the company offered when it first issued the debt securities, and it's usually higher than the original face value of the bonds. The call price is designed to compensate investors for lost income and to give them a higher return than they would expect if they held the bonds to maturity. The other choices (amortization amount, sinking fund amount, spread premium) do not refer to the specific amount paid to retire/extinguish a debt issue before maturity.

If a Firm Retires or Extinguish a Debt Issue Before