4. What is NOT TRUE about a call provision for the issuers? a. Inclusion of a ca

Question

4. What is NOT TRUE about a call provision for the issuers?
a. Inclusion of a call feature allows issuers to replace an old bond issue with a lower-interest cost issue if interest rates in the market increase.
b. Because the issuer may call the bonds earlier, the investor is exposed to additional credit risk.
c. A bond with call provisions mean that the issuer has the right to pay off a loan at any time, in whole or in part, prior to the stated maturity date.
d. A & B only
e. None of the Above

Explanation / Answer

Option A is inot true beacuse  call option helps athe issuer to replce the issue iwth a lower interets issure if market intrets rate is low and not wheninterets rate increases

Option B is False because if the option is exeprcise credit risk also reduces . If call option is bought back later the credit risk increaese,

Option C is true

Hence Option d)A & B is the correct answer

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.