Question

If a bond has a call provision, then it gives the bondholders the right but not the obligation to sell the bond back to the company. True or False?

Answer 1

“If a bond has a call provision, then it gives the bondholders the right but not the obligation to sell the bond back to the company”

The above statement is false

A bond which has a call option will allow the issuer to redeem bond before maturity. Hence the statement that if bond has call provision, then it gives the bondholders the right but not the obligation to sell the bond back to the company is false.

So the callable bond creates an obligation to the bondholders to sell the bond back to the company.