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Bonds 202: Callable Bonds

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1.
A call provision outlines the date and amount at which a bond issuer can call bonds it has issued.
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True. A call provision specifies when and at what price a bond issuer can redeem its bonds.
2.
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.
3.
For companies, the primary advantage of bond callability is to _______.
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Refinance debts with a more favorable interest rate. Callability protects companies when interest rates fall.
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.
A company may call a freely callable bond only after the call date.
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False. A company may call a freely callable bond at any time.