Bonds and Their Valuation(英文版)(ppt 50頁)

Bonds and Their Valuation(英文版)內容提要：
How does adding a “call provision” affect a bond?
Issuer can refund if rates decline. That helps the issuer but hurts the investor.
Therefore, borrowers are willing to pay more, and lenders require more, on callable bonds.
Most bonds have a deferred call and a declining call premium.
Sinking funds are generally handled in 2 ways
1.Call x% at par per year for sinking fund purposes.
2.Buy bonds on open market.
Company would call if kd is below the coupon rate and bond sells at a premium. Use open market purchase if kd is above coupon rate and bond sells at a discount.

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