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Bonds 202: Callable Bonds

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1.
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.
2.
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.
3.
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.
4.
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.
5.
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.