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Bonds 202: Callable Bonds

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1.
Bond callability directly enables a company to _______.
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Refinance debt at a lower interest rate. The primary reason that companies issue callable bonds is to protect themselves in the event that interest rates drop.
2.
Joanne is contemplating buying a callable bond. She will want to make a special point to check _______.
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The call date. Joanne can't be sure of receiving interest income after that date.
3.
A company may redeem its callable bonds _______.
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Before maturity. Callability is the ability of a bond issuer to redeem its bonds early.
4.
A call premium is the amount above par value that the investor receives when a bond is redeemed at maturity.
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False. A call premium is the amount above par value that the investor receives when a bond is redeemed before maturity.
5.
The yield-to-call is a bond's _______.
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Rate of return. The yield-to-call takes into account the purchase price, redemption price, interest payments, and call date.