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

Question

Quizplus · Accepted Answer

A call provision on a bond is a feature that allows the corporation to redeem the bonds at a specified price. This gives the corporation the option to retire the debt early if interest rates or market conditions change, saving them money in the long run. The other choices listed (B and C) are not accurate descriptions of a call provision. Option D is incorrect because the lowest price at which a bond will sell for is determined by market factors, such as supply and demand, and not by a call provision.

A Call Provision on a Bond