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
discuss the applicability of operating cycle in poultry industry

The actual risk-free rate is 4%. Inflation is likely to be 3% this year and 4% during the next 2 years. We suppose that the maturity risk premium is zero. What is the yield on 2

Absolute Performance Standard is a method of measuring an organization's development and how effective and efficient it is at operating its business. The absolute performance stand

Why are trend analysis and industry comparison important to financial ratio analysis? Trend analysis assists financial analysts and managers see whether a company's current fin

Concept and measurement of the cost of capital The evaluation of the worth of a long-term project suggests a certain norm or standard against which benefits are to be judged. R

SEC is the Regulatory body for investor protection in the United States which is created through the Securities Exchange Act of 1934.

dear, I found an exercise on the Internet which could help me has better to understand the finance, but there were no answers. What is that you can help me has to solve it. I''m fr

The TERRIER program cost estimate is in constant FY 2011 dollars, while the SPANIEL program cost estimate is in constant FY 2014 dollars. what is the most valid way of comparing th

Silvana Zhang of Sajjad Jafri & Geopeng Li Limited is considering purchasing a new widget making machine. She would like to know the maximum price she should pay for the new machin

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