Final answer:
The claim that bonds are always called at a premium to the market is false. Bond calls may involve a premium depending on the bond's terms and market conditions, but such an outcome is not assured or uniform across all bond issues.
Step-by-step explanation:
In the context of bonds, issuers may decide to call their bonds after a certain date, which can be done through direct call provisions or sinking fund redemptions. The statement that the call will always be at a premium to the market is false.
While issuers may call bonds at a premium, particularly if the bonds were issued with callable features that specify a call price above par value, it is not a given. The decision to call a bond typically depends on factors such as changes in interest rates, company refinancing strategies, and market conditions.
If prevailing interest rates have fallen since the bond was issued, the issuer might call the bond to reissue new debt at a lower rate, which may involve paying a premium to bondholders. However, the premium is a function of the bond's covenants and prevailing market rates at the time of the call, rather than a guaranteed outcome.