Question

Pick the correct statement from below. Multiple Choice A deferred call provision requires the bond issuer to pay the current market price, minus any accrued interest, should the bond be called. A deferred call provision allows the bond issuer to delay repaying a bond until after the maturity date should the issuer so opt. A deferred call provision prohibits the issuer from ever redeeming bonds prior to maturity. A deferred call provision prohibits the bond issuer from redeeming callable bonds prior to a specified date. A deferred call provision requires the bond issuer pay a call premium that is equal to or greater than one year's coupon should the bond be called.

Answer 1

Answer: A deferred call provision prohibits the bond issuer from redeeming callable bonds prior to a specified date.

Explanation:

A deferred call provision refers to the provision whereby the calling of a bond before a particular date is prohibited. The bond is known to be call protected during this period.

Therefore, a deferred call provision prohibits the bond issuer from redeeming callable bonds prior to a specified date.