Every Bond Is Issued with a Call Feature

question 88

Essay

Every bond is issued with a call feature. Explain what it means for a bond to be "called," then briefly describe the three most common types of call features. Also explain why investors suffer when bonds are called.

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Definitions:

Increase Owner's Equity

An action or event that enhances the net worth of a business as reflected in capital or owner's investment.

Decrease Assets

A reduction in the total value or amount of economic resources owned or controlled by an entity.

Owner's Equity

The residual interest in the assets of an entity that remains after deducting its liabilities, reflecting the ownership interest in the company.

Cash

Currency and other liquid instruments that are used to conduct transactions or settle debts.