What does a call provision call feature allow bond issuers to do and why would they do it?
Similarly, what does the call provision for a bond entitle the issuer to do?
A call provision grants the issuer the right to retire the debt, fully or partially, before the scheduledmaturity date. The right to call an obligation is included in most loans and therefore in all securities created from such loans.
Additionally, who benefits from a call provision on a corporate bond? A call provision allows an issuer to pay a bond early. Most bonds have a fixed maturation and value. If you buy a 10-year bond, you get back your capital plus a fixed interest rate in a decade. Call provisions are an exception to this rule.
Also know, what is a Call privilege?
call privilege. In securities trading, stipulation in a bond indenture that gives its issuer the right to redeem the outstanding bonds at a certain price, on one or more specified call dates.
What is a put provision?
A put provision is a provision in some bonds which allows the bondholder to resell a bond back to the bond's issuer at par or the face value of the bond before the bond matures.