CURRENT AFFAIRS

Detailed explanation-1: -Callable bonds give the issuer the right to buy bonds back prior to maturity, thereby raising the reinvestment risk for the bondholder.

Detailed explanation-2: -Callable or redeemable bonds are bonds that can be redeemed or paid off by the issuer prior to the bonds’ maturity date. When an issuer calls its bonds, it pays investors the call price (usually the face value of the bonds) together with accrued interest to date and, at that point, stops making interest payments.

Detailed explanation-3: -Many bonds issued today are “callable,” which means they can be redeemed by the issuer at set points before its listed maturity date. That means the issuer pays investors the call price and any accrued interest, and doesn’t make any future interest payments.

Detailed explanation-4: -A call option provides the issuer with the benefit of redeeming a bond prior to its maturity. Bonds are generally called when interest rates decline; therefore investors remaining in the market must reinvest in lower yields.

Detailed explanation-5: -Some bonds are callable and can be redeemed prior to the maturity date. These types of bonds are redeemable at premium (i.e. value greater than the face value of the bond). The redemption value is stated as a percentage of face value. For example, a $1000 bond redeemable at 105 is redeemed at 105% of $1000 = $1050.