Question-41: Then why investor would invest in bond’s which has call provisions?

Answer: As you know the call feature benefits the issuer and places the investor at a disadvantage, so there are multiple things are there to attract the investor for callable bonds

• Higher yield: Callable bonds carry higher yields than bonds that does not have call provisions.
• Call price: Sometimes the higher yield is often not sufficient compensation to the investor for granting the call privilege to the issuer. So, the price at which the bond may be called, is normally higher than the principal or face value of the issue.
• Call protection: Until this period, issuer cannot call the bond.

Question-42: Is there any restriction for the borrower’s in case on call provision?

Answer: Yes, there is and that is known as call protection, deferment period. In this case Borrower’s right to call has, a specified number of years in the early life of the bond during which the issuer may not call the debt.

Question-43: What is the different form of the call protection?

Answer: There are basically two forms as below

• Noncallable (NC): which cannot be called for any reason except to satisfy sinking-fund requirements.
• Nonrefundable (NF): This bond can be called if the funds used to call the bond are obtained from internally generated funds, such as the cash-flow from operations or the sale of property or equipment, or from nondebt funding such as the sale of common stock.

Question-44: What is the term bullet bonds specify?

Answer: These bonds are noncallable-for-life of issues are referred to as bullet bonds.

Question-45: What does it mean by currently callable bond?

Answer: The bonds are called currently callable if a bond does not have any protection against an early call.