homework
b.) What are call provisions and sinking fund provisions? Do these provisions make bonds more or less risky? · A call provision is a provision in a bond contract that gives the issuer the right to redeem the bonds under specified terms prior to the normal maturity date. The call provision generally states that the issuer will pay the bondholder an additional sum called call premium, over and above the par value if the bonds are called. Since this provision creates an increased reinvestment risk to the investor, required interest on a callable bond is higher than on equivalent non-callable bond.