Which of the following lowers the required interest rate that firms have to pay on their bonds? Which of the following raise the interest that firms have to pay? Private placements Public offerings Sinking fund provisions Protective Covenants Call provisions Collateral An active secondary market A low credit rating

Which of the following lowers the required interest rate that firms have to pay on their bonds? Which of the following raise the interest that firms have to pay? Private placements Public offerings Sinking fund provisions Protective Covenants Call provisions Collateral An active secondary market A low credit rating

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 12MC

See similar textbooks

Similar questions

Discuss the functioning and merits of callable and puttable bonds from an investor’s perspective. Discuss how the price of a puttable bond will differ from the price of a similar, plain vanilla bond and the main determinants of this price difference. In which market environment does the issuance of a callable bond make more sense from a corporate issuer’s perspective?
If a new competitor with scale enters, does that increase, decrease, or have no effect on the credit spread for a corporate bond?
Under which of the following situation, would a firm most likely to call its outstanding callable bonds? Group of answer choices a)The firm has financial distress. b)The company’s bonds are downgraded. c)The market interest rate increases d)The market interest rate declines
Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a company. A company earns a higher return with borrowed funds than it pays in interest.
Which of the following statements about sinking fund is NOT true? A Sinking fund provision facilitates the orderly retirement of the bond issue. B A company would prefer to use sinking fund to call bond if interest rate is below the coupon rate. C A company would use sinking fund to call bond if interest rate is well above coupon rate. D It is a good strategy for a firm to use its sinking fund to call bond if bond sells at a big premium.
Explain the use of a sinking-fund provision. How can it reduce the investor’s risk? What are protective covenants? Why are they needed? Explain the use of call provisions on bonds. How can a call provision affect the price of a bond? Explain the use of bond collateral, and identify the common types of collateral for bonds. What are debentures? How do they differ from subordinated debentures? What is a bond indenture? What is the function of a trustee with respect to the bond indenture? What are the advantages and disadvantages to a firm that issues low- or zero-coupon bonds?
____ occurs when a firm calls a relatively high interest rate issue and replaces it with a lower interest rate issue. a. Bond refunding b. A call feature c. A sinking fund d. Indenture refinancing
What causes a gain or loss on the sale of a bond investment? Group of answer choices when the selling company negotiates a better price when the selling price of the bond differs from the book value (cost) of the bond when the selling company has unamortized discounts when the selling company has unamortized premiums
Which of the following is a disadvantage to a corporation issuing bonds? Group of answer choices A)The required interest payment must be met each period. B)The liquid nature of the bonds makes them attractive to investors who may not want to hold them to maturity. c)The large principal payment due at maturity. d)Both the first and third answers above are both disadvantages. e)The first, second and third answers above are all disadvantages.
Which of the following events would make it more likely that a company would choose to call it’s outstanding callable bonds? An increase in market interest rates. An increase in the call premium. All the other statements are correct. The company’s bonds are downgraded. A reduction in market interest rates.
Which of the following statements is most correct? Group of answer choices A debenture is a secured bond that is backed by some or all of the firm’s fixed assets. Junk bonds typically have a lower yield to maturity relative to investment grade bonds. Subordinated debt has more default risk than senior debt. All of the statements above are correct. None of the statements above is correct.
Which of the following types of debt securities protect investors against interest rate risk? a. extendible notes b. floating rate bonds c. floating rate bonds and extendible notes d. original issue deep discount bonds