easy · Debt Capital Markets bond-instruments-structures
What is the primary risk an investor takes when buying a premium bond that has an embedded call option?
- The issuer may call the bond at par, resulting in an immediate capital loss for the investor.
- The issuer will increase the coupon rate, causing the price to fall.
- The bond's yield to maturity will rise to match the higher coupon.
- The investor will be forced to sell the bond back at a discount price.
Sign up free to see the explanation and track your rank →
More Debt Capital Markets bond-instruments-structures practice
- If a company has a leverage-based pricing grid and SOFR rises significantly while leverage
- What is meant by the 'bond floor' in the context of yield analysis?
- What is a 'call schedule' for a corporate bond?
- Which of the following describes a 'step-up' coupon in a callable bond?
- What is a 'deferred call'?
- What does a 5-year bond described as 'NC2' signify regarding its call protection?
- A 'make-whole' call differs from a standard 'fixed-price' call because the redemption pric
- If a bond has a 'Par Call' feature starting 6 months before maturity, what does this mean?