Match each bond structural feature or yield metric on the left with its correct operational description on the right.
- Yield to Call (YTC)The rate of return calculated assuming a bond trading at a premium is called by the issuer at the earliest eligible date.
- Sinking Fund ProvisionA contractual requirement for the issuer to periodically set aside money to retire a portion of the issue before maturity.
- Put Option FeatureA feature allowing the bondholder to redeem the bond back to the issuer at par value prior to maturity under specified conditions.
- Call ProtectionA designated period following issuance during which the issuer is restricted from redeeming the bonds early.
Answer
Yield to Call matches the rate of return calculated assuming a premium bond is retired at the earliest call date. Sinking Fund Provision matches the requirement for the issuer to set aside money periodically to retire debt prior to maturity. Put Option Feature matches the bondholder's right to redeem the bond back to the issuer at par prior to maturity. Call Protection matches the designated period during which the issuer cannot redeem the bond early.
Yield to Call measures return assuming early call on a premium bond. Sinking fund provisions require periodic capital deposits for partial principal retirement. Put option features grant bondholders redemption rights. Call protection establishes a lock-out period preventing early calls by the issuer.
Step-by-Step Solution
Key Concept
Bond Structural Provisions and Yield Calculation Metrics