Your institution holds 100,000 par value of ABC Municipal Bonds. If 20,000 par value of the holding has been called, how should the call be processed?

The call of a portion of municipal bonds, such as the scenario with the 100,000 par value of ABC Municipal Bonds where 20,000 par value has been called, is typically processed using the lottery method. This method is designed to ensure fairness and randomness in the selection of which bonds are called when the issuer decides to redeem some of their outstanding bonds before maturity.

Using the lottery method allows for an equitable selection process, minimizing bias or favoritism in determining which specific bonds will be redeemed. Each bondholder has their bonds entered into a drawing where selected bonds are called based on predetermined criteria. This method is especially useful in situations where multiple bondholders hold similar amounts and the issuer needs to maintain a transparent and just process for all investors involved.

Other options, such as handling the situation based on an account executive's decision or per a supervisor's direction, can lead to inconsistencies or perceptions of unfair treatment, as they may not base decisions on an objective method. Therefore, the lottery method is considered the standard and most appropriate approach in such scenarios.