The difference between face value of the bond and the call price of the bond is considered as _________?
Correct answer: A. call premium
- A. call premium
- B. call provision
- C. discount premium
- D. discount provision
Explanation
When a callable bond is redeemed above its face value, the excess of the call price over face value is the call premium. The call provision is the contract clause that gives the issuer the right to redeem the bond.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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