SIE practice questionmediumPutable Bonds
A putable bond benefits an investor by allowing them to:
- ADefer taxes on interest income
- BReceive higher coupon payments
- CConvert the bond to common stock
- DRedeem the bond before maturity at par✓ Correct answer
Explanation
Why D — Redeem the bond before maturity at par
Putable bonds give investors the right to sell the bond back to the issuer at par before maturity. They do not increase coupons, cannot be converted to stock, and do not provide tax deferral.
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