Questions: Investors are willing to purchase bonds with a call feature only if the bonds offer a(n) A. slightly lower return than similar bonds without a call feature. B. extraordinary return similar to an IPO. C. slightly higher number of shares of the issuer's stock. D. slightly higher return than similar bonds without a call feature.

The answer is D: slightly higher return than similar bonds without a call feature.

Explanation for each option:

A. Slightly lower return than similar bonds without a call feature: This is incorrect because investors would not accept a lower return for a bond with a call feature. A call feature allows the issuer to redeem the bond before its maturity, which introduces additional risk for the investor. Therefore, investors would require compensation for this risk, not a lower return.

B. Extraordinary return similar to an IPO: This is incorrect because while investors do expect a higher return for bonds with a call feature, it is not typically as high as the returns expected from an IPO. IPOs are generally associated with higher risk and potentially higher returns, which is not the same context as bonds with a call feature.

C. Slightly higher number of shares of the issuer's stock: This is incorrect because the call feature in bonds does not typically involve the issuance of shares. Bonds with a call feature are debt instruments, and the return is usually in the form of interest payments, not stock shares.

D. Slightly higher return than similar bonds without a call feature: This is correct because the call feature introduces additional risk for the investor. The issuer can redeem the bond before maturity, potentially at a time when interest rates have fallen, which would leave the investor needing to reinvest at lower rates. To compensate for this risk, investors require a slightly higher return compared to similar bonds without a call feature.

In summary, investors require a slightly higher return for bonds with a call feature to compensate for the additional risk associated with the possibility of the bond being called before maturity.