Question

Just after the construction of a bridge, financed by a revenue bond, massive flooding causes part of the bridge to collapse. The remaining portion of the bridge is condemned and the municipality calls the revenue bonds. What type of call is this? (A) This would be an extraordinary call. (B) This would be a refunding call. (C) This would be a "sinking" fund call. (D) This would be a defeasance call.

Answer 1

Answer:(A) This would be an extraordinary call.

Explanation:

Extraordinary call also known as extraordinary redemptions refers to redeeming the bonds issued but not used as per scheduled use; which means the bond that was used in a way that result into a nontaxable bond interest becoming taxable or when a project that was being financed experiences a disastrous situation in which the project can't continue as it was scheduled or get demolished like the project above in which part of the bridge collapsed. Extraordinary calls occur usually in municipal bonds in which the project financed is aimed at improving the community service but failed to live up to that.

An extraordinary redemption means the people who gave the bond to the company can redeem it based on the circumstances that have distrupted the project from the initial discussed schedule .