An 8 percent debenture has five years of call protection and is thereafter callable at 100...
An 8 percent debenture has five years of call protection and is thereafter callable at 100 percent, except that it is nonrefundable below interest cost. Which of the following statements is correct?
A. The debenture may be called any time during the next five years.
B. The debenture may not be called during the next five years.
C. The lender has the option to demand early repayment.
D. The bond should be called when the yield on similar noncallable bonds falls to 8 percent.
Homework Answers
B. The debenture may not be called during the next five years.
Above bond has call protection of 5 years which means bond can not be called for first 5 years. Further, Issuer call the bond when current ytm is less than ytm at which bond issued.
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
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