question archive All else being equal, which of the following provisions would INCREASE the interest rate on a bond? A
All else being equal, which of the following provisions would INCREASE the interest rate on a bond? A
Subject:BusinessPrice:2.86 Bought8
All else being equal, which of the following provisions would INCREASE the interest rate on a bond?
A.Sinking fund
B. Call provision
C. Protective covenants
D. Convertible provision
Select the correct statement.
A. If the firm enters bankruptcy, the order of payment would be 1) common shareholders, 2) senior debt holders, 3) subordinated debt holders, and 4)preferred stockholders
B. The convertible premium on a bond is the additional interest rate received on a convertible bond compared to a non-convertible bond
C. A private placement of bonds means that the company must abide by financial disclosure laws; public offerings of bonds do not have to abide by these laws.
D. Long-term bonds have more interest rate (price) risk than short-term bonds.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
1. Call provision
Those bonds with a call provision will have to pay investors a much higher interest rate than those that are noncallable bond. A call provision helps in refinancing debt at a lower interest rate
2. Long-term bonds have more interest rate (price) risk than short-term bonds.
We know that Investors holding long term bonds have a greater degree of interest rate risk than those who are holding shorter term bonds. It simply means that when we have interest rates change by 1%, long term bonds will result to a greater change to their price
