A Call Feature in a Bond Allows the Issuer the Opportunity

question 63

True/False

A call feature in a bond allows the issuer the opportunity to repurchase bonds at a stated price prior to maturity. This option has a greater chance of being exercised (to the detriment of the bondholder) if market interest rates have fallen since the bond was issued.

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Definitions:

Minimum Acceptable Rate

The lowest rate of return on an investment that a manager or investor is willing to accept.

Investment Decision

The process of making choices about where to allocate funds in various assets with the aim of generating returns over time.

Net Cash Flow

The difference between a company's cash inflows and outflows in a given period, indicating how much cash is generated or spent.

Income Taxes

Taxes levied by the government on earnings generated by businesses and individuals within their jurisdiction.