Under normal conditions, which of the following would be most likely to increase the coupon rate required to enable a bond to be issued at par? A) Adding additional restrictive covenants that limit management's actions. B) Adding a call provision. C) The rating agencies change the bond's rating from Baa to Aaa. D) Making the bond a first mortgage bond rather than a debenture. E) Adding a sinking fund.

Question

Quizplus · Accepted Answer

Adding a call provision increases the risk to bondholders, as the issuer can redeem the bond before maturity, typically when interest rates fall. This risk requires a higher coupon rate to compensate bondholders.

Under Normal Conditions, Which of the Following Would Be Most