The Party Who Has the Right to Exercise a Call

question 127

Multiple Choice

The party who has the right to exercise a call option on bonds is the

• A)investment banker.
• B)bondholder.
• C)bearer.
• D)issuer.

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Definitions:

Coupon Rate

The annual interest rate paid by a bond relative to its face value, expressed as a percentage.

Duration-based Immunization

A strategy used in portfolio management to minimize the risk of interest rate fluctuations by matching the duration of assets and liabilities.

Rebalanced

The process of realigning the weightings of a portfolio of assets to maintain an original or desired level of asset allocation or risk.

Modified Duration

A measure of the price sensitivity of a bond or other debt instrument to an interest rate change, factoring in the changing cash flow timings.