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Call provisions on convertible bonds protect the: Multiple Choice company against extreme stock price increases. bank...

Call provisions on convertible bonds protect the:

Multiple Choice

company against extreme stock price increases.

bank against extreme stock price decreases.

investor against extreme stock price increases.

company against extreme stock price decreases.

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Answer #1

Call provisions on convertible bonds protect the:

company against extreme stock price increases.

If the bond are issued with call provisions then the company has the option to repay the bond holder before maturity. The company calls the existing bond and after redeeming them they issue the new bonds. This is done in case when the rate of interest decreases and co find it profitable to redeem the high interest bond and issue new one with the lower interest rates. The company redeem such bond at a predetermined price knwn as call price.

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