Call on a bond - purpose of a deferred call
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Under what circumstances would a call on a bond be exercised by a corporation? What is the purpose of a deferred call?
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Solution Summary
The 290 word solution explains about call features on bonds: what they are, who benefits from a call, and why a seller or a buyer might like a call feature.
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A call feature on a bond gives the issuing company the right to call the bond (retire it by paying it off). A deferred call specifies some date in the future after which the company may call the bond, if they choose to.
An example might be a 10 year bond with a five year deferred call feature. That means it can't be called until after 5 years from date of issue.
Why is this done? It ...
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