Question

Travis recently purchased a callable bond. However, that bond cannot be currently redeemed by the issuer. Thus, the bond must currently be:

1) subject to a sinking fund provision.
2) a debenture.
3) a "fallen angel."
4) call protected.
5) unrated.

Answer 1

If a bond cannot be currently redeemed by the issuer, it is call protected.

Step-by-step explanation:

A callable bond is a type of bond that gives the issuer the right to redeem the bond before its maturity date. In this case, if the bond cannot be currently redeemed by the issuer, it means that it is call protected. Call protection prevents the issuer from calling or redeeming the bond before a specified period of time. This offers the bondholder the assurance that the issuer will not invoke the call provision and force the bond to be redeemed early.