Which of the following factors would increase the likelihood that a company would call its outstanding bonds at this time?
A) A provision in the bond indenture lowers the call price on specific dates, and yesterday was one of those dates.
B) The flotation costs associated with issuing new bonds rise.
C) The firm's CFO believes that interest rates are likely to decline in the future.
D) The firm's CFO believes that corporate tax rates are likely to be increased in the future.
E) The yield to maturity on the company's outstanding bonds increases due to a weakening of the firm's financial situation.

Question

Quizplus · Accepted Answer

A provision in the bond indenture that lowers the call price on specific dates would make it more attractive for a company to call its outstanding bonds on those dates, as they can save money by buying back the bonds at a lower price. None of the other factors listed necessarily indicate a reason for the company to call its outstanding bonds.

Which of the Following Factors Would Increase the Likelihood That