Consider the following statements:
Statement 1: The coupon rate and principal amount on a capital‐indexed bond increases with a specified index.
Statement 2: In a Bermuda‐style call, the issuer has the right to call bonds on specified dates following the call protection period.
Which of the following is most likely?
In a capital‐indexed bond, a fixed coupon rate is applied to a principal amount that increases with a specified index, such that the coupon payment also rises with the index. Statement 2 is indeed correct.