CFA Level I · CFA Level I Exam · Fixed-Income Cash Flows and Types
A corporate bond is callable at par after a two-year call protection period. The call protection period is best described as the period during which the:
The call protection period is the time after issuance during which the issuer cannot call the bond. It shields investors from early redemption, often called a lockout or cushion period, after which the issuer may redeem at the specified call prices.
- Abondholder may convert the bond into shares of the issuer
- Bissuer may redeem the bond at a price above par only
- Cissuer is prohibited from exercising its right to call the bondCorrect
Explanation
Call protection, also called the lockout or cushion period, is when the issuer cannot call the bond. It protects investors from early redemption soon after issue. Conversion rights relate to convertible bonds, which is a different feature.
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