Call Provisions A company is contemplating a long-term bond issue. It is debating whether or not to include a call provision. What are the benefits to the company from including a call provision? What are the costs? How do these answers change for a put provision?
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- 12. How would the amortization of discount on bonds payable affect the carrying amount of bond and net income, respectively? * a. Increase and Descrease b. Increase and Increase c. Decrease and Increase d. Decrease and Decrease5B) Explain what a callable bond is and under what conditions and expectations a company mightwish to issue a callable bond.1. State 2 reasons why Net Present Value is a better decision criteria compared to other alternatives. 2. Why might a company prefer to issue secured bonds rather than unsecured bonds?
- 2. Bonds are sold at a premium if the a.market rate of interest was more than the stated rate at the time of issue. b.market rate of interest was less than the stated rate at the time of issue. c.company will have to pay a premium to retire the bonds. d.issuing company has a better reputation than other companies in the same business.21. Which of the following is a source of short-term financing? Group of answer choices Issue Long Term Bonds Issue New Stock Factoring Accounts Receivable1. Anton wants to have a portion of ownership of a certain company. Which of the following should he invest? A. Annuity B. Bonds C. Shares D. Stocks 2. What writtwn contract is exhibited by a debtor that is legally binding which stipulates the amount borrowed at a specified tine in the future? A. Stocks B. Annuity C. Amortization D. Bonds 3. Which of the following covers when the frequency of the regular payment is different from the frequency of interest conversion? A. Bonds B. Ammortilation C. General annuity D. Simple annuity 4. What term is refers to the type of arrangement where composition is important but not order? A. Courting B. Permutation C. Multiplication rulw D. Combination 5. If p q is a tautology, then what can you inter about p and q? A. P and Q are either true or false but not both B. P and Q are always false C. P and Q are always true D. P and Q are either both true or false both false
- 17.Which of the following statements is/are true?Statement I. Generally, the tenor of the investment also defines the riskiness of the repayment of debt.Statement II. The longer the life of the debt, the riskier the repayment. Hence, the interest rate is lower.Statement III. The term tenor describes the length of time remaining in the life of a financial contract. a. II only b. III only c. I and III d. II and III8. Any of the following incidents will increase the chances of a corporation calling the unpaid callable bonds?a. A decrease in interest rates on the open market.b. The company's shares are lowered in value.c. A higher call premium.d. Both a and b are true.e. A, B, and C are right.1. Should financial institutions invest in junk bonds? 2. Explain the use of call provisions on bonds. How can a call provision affect the price of the bond?3. What are protective covenants? Are they needed? Explain why.