How is a make-whole call calculation?
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond’s remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium.
How does a make-whole call provision differ from a traditional call provision?
What is meant by a make-whole call provision? With a traditional call provision, the call price is fixed, With a make-whole call provision, the payment when the issuer calls a bond is determined by the present value of the remaining payments discounted at a small spread over a maturity-matched Treasury yield.
What does T 50 make-whole mean?
What is a Make-Whole Call Provision? A make-whole call provision is a clause in a bond’s contract that allows the issuer to retire the bond early by paying off the remaining debt on the bond. and the principal that the lender would’ve received if the bond was not retired early.
What is make-whole amount?
Make-Whole Amount means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero.
What is a make whole call price?
Key Takeaways. A make-whole call provision is a type of call provision on a bond allowing the issuer to pay off remaining debt early. The payment is derived from a formula based on the net present value (NPV) of previously scheduled coupon payments and the principal that the investor would have received.
What is a make-whole call provision?
A make-whole call is a type of call provi- sion in a bond allowing the borrower to pay off remaining debt early. The borrow- er has to make a lump sum payment to the holder derived from an earlier agreed- upon formula based on the net present value (NPV) of future coupon payments not paid because of the call.
What is a make-whole call price?
What does make-whole at 25 mean?
The loan agreement contains a make-whole provi- sion that if Company A prepays the debt, it will pay the investor an amount equal to all the future semiannual cash flows dis- counted at the current Treasury rate plus 25 basis points.
What is a sinking fund example?
A sinking fund is simply a pool of money built up over time to cover a significant future expense. For example, when corporations borrow money via bonds, they’ll often set up sinking funds to make repaying the debt less of a hassle when it comes due. The same logic applies when using sinking funds in personal finance.