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Optimal redemption provision

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Definition of Optimal redemption provision

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Optimal redemption provision

provision of a bond indenture that governs the issuer's ability to call the
bonds for redemption prior to their scheduled maturity date.



Related Terms:

Antidilution Provisions

A clause in a shareholders agreement preventing a company from issuing additional shares, without allowing the current shareholders the opportunity to participate in the offering to avoid dilution of their percentage ownership.


Antifraud Provisions

Specific sections and rules of the 1933 Act and 1934 Act that are
designed to reduce fraud and deceit in financial filings made with the SEC. The antifraud provisions
are Section 17(a) of the 1933 Act and Section 10(b) and Rule 10b-5 of the 1934 Act.


Call provision

An embedded option granting a bond issuer the right to buy back all or part of the issue prior
to maturity.


Fair price provision

See:appraisal rights.


Income Tax Provision

The expense deduction from pretax book income reported on the
income statement. It consists of both current income tax expense and deferred income tax
expense. The terms income tax expense and income tax provision are used interchangeably.



Mandatory redemption schedule

Schedule according to which sinking fund payments must be made.


Optimal contract

The contract that balances the three types of agency costs (contracting, monitoring, and
misbehavior) against one another to minimize the total cost.


Optimal Redemption Provision Image 2

optimal mix of capital

the combination of capital sources at which the lowest weighted average cost of capital is achieved


Optimal portfolio

An efficient portfolio most preferred by an investor because its risk/reward characteristics
approximate the investor's utility function. A portfolio that maximizes an investor's preferences with respect
to return and risk.


optimal solution

the solution to a linear programming problem
that provides the best answer to the objective function


Preferred equity redemption stock (PERC)

Preferred stock that converts automatically into equity at a
stated date. A limit is placed on the value of the shares the investor receives.


Provision

Estimates of possible future liabilities that may arise.


Provision for Doubtful Accounts

An operating expense recorded when the allowance for
doubtful accounts is increased to accommodate an increase in uncollectible accounts receivable.


Provisional call feature

A feature in a convertible issue that allows the issuer to call the issue during the noncall
period if the price of the stock reaches a certain level.


Put provision

Gives the holder of a floating-rate bond the right to redeem his note at par on the coupon
payment date.


Redemption charge

The commission charged by a mutual fund when redeeming shares. For example, a 2%
redemption charge (also called a "back end load") on the sale of shares valued at $1000 will result in payment of $980 (or 98% of the value) to the investor. This charge may decrease or be eliminated as shares are held for
longer time periods.


Optimal Redemption Provision Image 3

Redemption cushion

The percentage by which the conversion value of a convertible security exceeds the
redemption price (strike price).


Redemption value

See Par value.



Sales Revenue Revenue recognized from the sales of products as opposed to the provision of

services.



 

 

 

 

 

 

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