Series 79 practice questioneasyDebt Offerings
What does optional redemption, or a call feature, give the issuer?
- AThe right to force investors to buy additional notes
- BAn automatic extension of shelf registration
- CThe ability to repay the bonds before maturity, usually subject to specified terms or premiums✓ Correct answer
- DA waiver from Trust Indenture Act requirements
Explanation
Why C — The ability to repay the bonds before maturity, usually subject to specified terms or premiums
The ability to repay the bonds before maturity, usually subject to specified terms or premiums Call provisions create flexibility for refinancing if rates fall or credit quality improves. Because that option benefits the issuer, callable debt may require a higher coupon or make-whole protection.
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