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Bonds 202: Callable Bonds

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1.
A company that cannot call its bonds before maturity may be at a competitive disadvantage.
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True. A company that cannot refinance its debts at lower interest rates faces a disadvantage in the marketplace.
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.
Todd just bought a bond with a call date of eight years in the future. His bond therefore offers _______.
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Call protection. Many bond investors like to look for bonds that offer call protection.
5.
When a bond issuer redeems a bond before maturity, it may compensate the bondholder with a _______.
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Call premium. This is the amount the issuer pays above the bond's par value at early redemption.