A modified form of call provision which reduces the reinvestment risk to the bondholders.
With a make-whole bond, the call price is not fixed. It is based on the present value of the future cash flows the bondholder will not receive. As such, the calculated call price is unlikely to be lower than the market value of the bond.
Therefore the issuer is unlikely to call the bond except when corporate circumstances, such as an acquisition or restructuring, require it.
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Are you a CFA Level I candidate, or someone who is exploring taking the CFA exam? Four years ago, I was in your shoes. I am a Computer Engineering graduate and have been working as an engineer all my life. Having developed a keen interest in finance, I decided on a career switch to the finance field and enrolled into the CFA program at the same time.
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