As an issuer of a bond, the interest rate will be higher if it is callable....
| As an issuer of a bond, the interest rate will be higher if it is callable. Given the increased costs, why would a borrower issue bonds that are callable? |
Homework Answers
The issuer gets the right amd can exercise the call option when its favorable to do so. It is a right and not an obligation. In case of declining rate environment, instead of continuing to pay the high rate the issuer can call the earlier bond and issue new bond which pays lower rate.
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As an issuer of a bond, the interest rate will be higher if
it is callable....
10. A callable corporate bond can be purchased by the bond issuer before maturity for a...
10. A callable corporate bond can be purchased by the bond issuer before maturity for a price specified at the time the bond is issued. Corporation X issues two bonds (bond A and bond B) at the same time with the same maturity, par value, and coupons. However, bond A is callable and bond B is not. Which bond will sell for a higher price and why? (a) Bond B; bond A should have the value of bond B minus...
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If you buy a callable bond and interest rates decline, will the value of your bond...
If you buy a callable bond and interest rates decline, will the value of your bond rise by as much as it would have risen if the bond had not been callable? Explain. Here is what I have so far: A callable bond is a bond that can be redeemed before its maturity date. This basically means that the issuer can call the bond at a predetermined call date if they chose to. If interest rates decline in the market,...
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a) describe what a bond is? b) for the issuer of the bond, why would they prefer to issue bonds over shares? c) on a balance sheet should a bond be classified as liabilotu or equity?
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Which of the following statements is most correct? A The interest rate on a new issue of callable bonds is likely to exceed that on a similar new issue of noncallable bonds. B The interest rate on a new issue of noncallable bonds is likely to exceed that on a similar new issue of callable bonds. C Noncallable bonds are riskier to the investor while callable bonds are riskier to the issuer. D There is no difference in risk to...
1. Why do callable bonds usually pay a higher coupon rate than noncallable bonds? A. To...
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Given the following information, calculate the present value of the following bond that pays semi-annual coupons....
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Which of these bonds does NOT provide options to the issuer? a/ PIK note b/ Callable...
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questions 1-4 please 1. Why do callable bonds usually pay a higher coupon rate than noncallable...
questions 1-4 please
1. Why do callable bonds usually pay a higher coupon rate than noncallable bonds? A. To compensate investors for their extra tax liability B. Because callable bonds have greater default risk than noncallable C. To compensate investors who might suffer a loss as a result of their bonds being called D. To comply with SEC regulations E. None of the above 2. You own a convertible bond issued by MJ9 Corporation that can be exchanged for 60...
Bond questions 52018 PART-1-Please SELECT from the choices presented bonds payable callable bond convertible bond Annuities...
Bond questions 52018 PART-1-Please SELECT from the choices presented bonds payable callable bond convertible bond Annuities Streams of level (ie, the same amount each pariod) payments occurring on regular 1. intervals An obligation dvded into transtferable units requiring the issuer to make periodic interest payments and an eventual repayment of the face amount, 2. A bond that provides the issuer an option to reacquire the bends before scheduled 3 maturity at a preset price A bond that may be converted...
10. A callable corporate bond can be purchased by the bond issuer before maturity for a price specified at the time the bond is issued. Corporation X issues two bonds (bond A and bond B) at the same time with the same maturity, par value, and coupons. However, bond A is callable and bond B is not. Which bond will sell for a higher price and why? (a) Bond B; bond A should have the value of bond B minus...
Hialurily date. • A bond issuer is said to be in default if it does not pay the interest or the principal in accordance with the terms of the indenture! agreement or if it violates one or more of the issue's restrictive covenants. • A bond contract feature that requires the issuer to retire a specified portion of the bond issue each year is called a sinking fund provision • A bond's call provision gives the issuer the right to...
1. Why do callable bonds usually pay a higher coupon rate than noncallable bonds? A. To compensate investors for their extra tax liability B. Because callable bonds have greater default risk than noncallable C. To compensate investors who might suffer a loss as a result of their bonds being called D. To comply with SEC regulations E. None of the above 2. You own a convertible bond issued by MJ9 Corporation that can be exchanged for 60 shares of the...
questions 1-4 please
1. Why do callable bonds usually pay a higher coupon rate than noncallable bonds? A. To compensate investors for their extra tax liability B. Because callable bonds have greater default risk than noncallable C. To compensate investors who might suffer a loss as a result of their bonds being called D. To comply with SEC regulations E. None of the above 2. You own a convertible bond issued by MJ9 Corporation that can be exchanged for 60...
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