Redeem ability

Preference capital has a limited life specified fixed maturity after which it must be retired. However, there are no serious penalties for breach of redemption stipulation.

The preference shares have a stated call price which is above the original issue price and over time like the call feature on bonds, the call feature on preference shares provides to the issuer company. Since the market price of straight preference shares tends to fluctuate with changes in interest rate, the value of the preference share call feature is determined by the same considerations as is the call feature for bonds (discussed).

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