37.2k views
1 vote
A provision whereby the corporation is prohibited from calling the bonds for a stipulated time is known as a(n) ______ call provision.

a) Annual
b) Deferred
c) Extraordinary
d) Early

User Xhantar
by
7.8k points

1 Answer

3 votes

Final answer:

A provision that prevents a company from calling bonds for a set period is called a deferred call provision. It offers security to bondholders against premature redemption of their investment.

Step-by-step explanation:

A provision whereby the corporation is prohibited from calling the bonds for a stipulated time is known as a deferred call provision. This kind of provision is designed to provide a guarantee to bondholders that their bonds cannot be redeemed by the issuing company before a certain date. It's a typical feature in the bond agreement meant to protect investors from the risk of the company refinancing the bond under more favorable terms before the bondholders have realized full investment benefits.

User Grundic
by
8.4k points