Question

Russell’s has a bond issue outstanding. The issue's indenture provision prohibits the firm from re-deeming the bonds during the first five years following issuance. This provision is referred to as the _____ provision. a. safeguard b. market c. liquidity d. deferred call e. sinking fund

Answer 1

Answer:

The correct answer is letter "D": deferred call.

Explanation:

While talking about bonds, a deferred call represents a restriction that companies issuing bonds have to call the bond before a certain date. Deferred calls guarantee receipts of payment during the time it lasts and stability, but ties the company's hands by making payments to bondholders during the same time. In some cases, bonds with deferred calls have lower interest rates.

Answer 2

Answer:

d. deferred call

Explanation:

Based on the information provided within the question it can be said that the provision that is being mentioned in this scenario is called a deferred call provision. Like mentioned, this refers to a provision that prevents a company from calling the bond before a pre-defined date (which in this scenario is 5 years), meanwhile the bond is referred to as call protected.