Non-callable versus non-refundable bonds, Financial Management

A bond is said to be currently callable if the issue is not protected against early call provision. But most new bond issues, even if currently callable, usually have some restrictions against certain types of early redemption. The most common restriction is that of prohibiting the refunding of the bonds for a certain number of years or for the issue's life. Bonds that are non-callable for the issue's life are more common than bonds which are non-refundable for life but otherwise callable.

Call protection is much more robust than refunding protection. While there may be certain exceptions to absolute or complete call protection in some cases, call protection still provides greater assurance against premature and unwanted redemption than refunding protection. Refunding protection merely prevents redemption from certain sources, namely the proceeds of other debt issues sold at a lower cost. The holder is protected only if interest rates decline and the borrower can obtain low-cost money to pay off the debt.

Posted Date: 9/8/2012 6:21:31 AM | Location : United States







Related Discussions:- Non-callable versus non-refundable bonds, Assignment Help, Ask Question on Non-callable versus non-refundable bonds, Get Answer, Expert's Help, Non-callable versus non-refundable bonds Discussions

Write discussion on Non-callable versus non-refundable bonds
Your posts are moderated
Related Questions
Q. Conservative Approach of Financial Management? An exact matching plan may not be followed in practice. A firm may adopt a conservative approach in financing its current and

Why is capital budgeting analysis so important to the firm? The major goal of the financial manager is to maximize shareholder wealth. Capital investments along with positive N

Historically, three types of shapes have been observed for the yield curve. The relative change in the yield for each treasury maturity is known as a

Q. Explain Risk Adjusted Discount Rate Method? In the risk adjusted discount rate method the future cash flow from capital projects are discount at the hazard adjusted discount

Measuring volatility is very important as it is a critical input in valuation models. In subsequent chapters we will see the importance of assumed volatilit

The Total Investable Capital Market Portfolio According to a report prepared by McKinsey in January 2007, World financial assets including bonds, stocks, corporate debt securit

Question: On 1st October 2001 a man then aged 34 took out an endowment assurance policy with a sum assured of $100,000 payable on survival to age 50 or at the end of the year o

What are the objectives of working capital management? Briefly explain the various elements of operating cycle.


The following are extracts of the Income Statement and Balance Sheet for Umar plc. Extract Balance Sheet at 30 June 20X2               20X1 £'000  £'000                £