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Terms in this set (133)

Called by issuer: bonds can be called (redeemed) at the option of the issuer, at a pre-established premium price, after a specified date
Advantageous to issues: low call price would be attractive for issuers
· High call premium would not be attractive for issuer
Ceiling on appreciation: call price can place a ceiling on the appreciation of a bond.
Call protection: fixed time period where bonds may not be called by the issuer
· Bondholders want interest rates to decline during this time period.
· Bondholders want bond prices to rise during time period
Coupon rate: the higher the coupon rate on the bond the greater the chance that the bond will be called.
Callable feature: bonds and preferred stock may be callable but common stock is never callable
When bonds are called: bondholder receives "call premium" plus the accrued interest.
· Company's credit worthiness improves (less debt)
· Debt-to-net worth ratio improves (decreases)
"Notice of call": prior to calling bonds the issuer must give investors the "notice of call." During this time investors may: (what puts the most money in their pocket)
· Concert the bonds (if convertible)
· Sell the bonds
· Wait for redemption date
Interest payments: stops after a bond is called
Trade at lower price: usually trade at a lower price because the call features are undesirable to investors
"Partial call": when an issuer calls bonds, it can make a "partial call" where only part o the issue is redeemed
· The bonds called are selected on a "random basis" from the entire issue