Business / Taxes / Noncallable: When a bond is noncallable, the issuer cannot redeem it before the stated maturity date. Some bonds have call protection for their full term, and others for a fixed period — often ten years. The appeal of a noncallable bond is that the issuer will pay interest at the stated coupon rate for the bond's full term. In contrast, if a bond is called, you receive a lump-sum repayment of principal, which you must reinvest. Frequently, rates are lower at call that they were when the bond was issued, which means your reinvested principal will provide a smaller yield.

Cushion Theory

Business / Finance / Cushion Theory: High-coupon bonds that sell at only at a moderate premium because they are callable at a price below that at which a comparable noncallable bond would sell. Cushion bonds offer considerable downside p MORE

Conditional Sales Contracts

Business / Finance / Conditional Sales Contracts: A protective guarantee that, in the event a hign yield bond is called, the issuing corporation will replace the bond with a noncallable bond of the same life and terms as the bond that is being called MORE