Redemption Date

### What is the purpose of the redemption date in a bond agreement? - [ ] To establish the date when interest payments start. - [ ] To set the date for calculating bond prices. - [x] To determine when the principal will be repaid by the issuer. - [ ] To signify the point at which bonds can be freely traded. > **Explanation:** The redemption date is specifically intended to determine when the issuer will repay the principal amount to the bondholder, thus settling the debt agreement. ### Is it possible for the redemption date to occur before the maturity date? - [x] Yes, this is possible with callable bonds. - [ ] No, the redemption date and maturity date are always the same. - [ ] Only under certain international laws. - [ ] Only during a financial crisis. > **Explanation:** Callable bonds may have a redemption date that occurs before the maturity date if the issuer decides to exercise the call option. ### What financial event does the redemption date trigger? - [ ] Issuing new bonds. - [x] Repaying the bond's principal amount. - [ ] Adjusting interest rates. - [ ] Registering the bond with SEC. > **Explanation:** The redemption date triggers the repayment of the bond's principal amount, completing the debt obligation of the issuer. ### Could the issuer decide to extend the redemption date without bondholder consent? - [ ] Yes, they can extend it anytime. - [ ] Yes, but only once. - [x] No, typically it requires bondholder consent and is very uncommon. - [ ] Yes, if approved by a governmental authority. > **Explanation:** Typically, extending the redemption date would require bondholder consent, and it is an uncommon practice. ### How does the market perceive bonds nearing their redemption date? - [ ] As high-risk investments. - [ ] As introductory offers. - [x] As safer because they are closer to repayment. - [ ] As redundant financial tools. > **Explanation:** Bonds nearing their redemption date are perceived as safer investments since the repayment of the principal is imminent. ### What must an issuer do on the redemption date? - [ ] Announce another bond offer. - [ ] Issue dividends to stockholders. - [x] Repay the bondholder the principal amount borrowed. - [ ] Liquidate assets. > **Explanation:** On the redemption date, the issuer must repay the bondholder the principal amount that was originally borrowed. ### What type of bond allows the issuer to redeem it before its scheduled maturity date? - [ ] Convertible bond - [x] Callable bond - [ ] Municipal bond - [ ] Treasury bond > **Explanation:** Callable bonds give the issuer the right to redeem the bond before the scheduled maturity date, usually for a premium. ### What impact does an imminent redemption date have on the price of a bond? - [ ] The price drops significantly. - [x] The price usually approaches the bond's face value. - [ ] The price becomes volatile. - [ ] The price is fixed permanently. > **Explanation:** As the redemption date approaches, the price often converges to the bond's face value since the principal repayment is forthcoming. ### What does redemption mean in the context of bonds? - [ ] Issuing new bonds to replace old ones. - [x] Repaying the principal on a bond to the holder. - [ ] Adjusting the bond's interest rate. - [ ] Trading bonds in secondary markets. > **Explanation:** Redemption in the context of bonds means repaying the principal amount to the bondholder. ### When discussing bond terms, why is the redemption date crucial? - [ ] It determines the brokerage fees. - [ ] It indicates the starting point for tax calculations. - [ ] It marks when semi-annual dividends are paid. - [x] It specifies when the principal must be repaid, ending the debt obligation. > **Explanation:** The redemption date is crucial as it specifies the deadline for repaying the principal amount, thus concluding the debt arrangement between the issuer and the investor.