SIE practice questioneasyCallable bonds
Which of the following best describes a callable bond?
- ABond can be converted to common stock at any time
- BBondholder has the right to sell the bond back to the issuer at par
- CBond can only be redeemed at maturity
- DIssuer has the right to redeem the bond prior to maturity✓ Correct answer
Explanation
Why D — Issuer has the right to redeem the bond prior to maturity
Callable bonds allow the issuer to repay principal before maturity, usually at a specified call price. Puttable bonds give this right to the holder, not the issuer.
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