Question

A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030, plus any accrued interest. The additional $30 is called which one of the following? Question 11 options: call premium original-issue discount redemption discount dirty price redemption value?

Answer 1

Answer:

call premium

Explanation:

The bonds has certain conditions and one of them is the right of the issuer to purchase the bonds therefore, extinguish the debt before the maturity expressed in the bond. As this is a change to the original terms usually the issuer is forbidden to do so in the first years of the bond or it can do it at given dates. In any case, the issuer pays a premium for this right to compensate the bondholders