Question
 Which of the following methods of redeeming the bonds
before maturity is generally considered the most detrimental for bondholders?Solution
The call provision gives the issuer the right to purchase the bonds at a given price, which the issuer would not do unless that price was below the market price. This is detrimental for bondholders as they will get call price as a redemption price and will face reinvestment risk as they will have to invest their proceedings at a lower rate.
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