Listed below are some provisions that are often contained in bond indentures. Which of these provisions, viewed alone, would tend to REDUCE the yield to maturity that investors would otherwise require on a newly issued bond? 1. Fixed assets are used as security for a bond.
2) A given bond is subordinated to other classes of debt.
3) The bond can be converted into the firm's common stock.
4) The bond has a sinking fund.
5) The bond has a call provision.
6) The indenture contains covenants that prevent the use of additional debt.

Question

Quizplus · Accepted Answer

Using fixed assets as security, having a conversion option, a sinking fund, and covenants preventing additional debt all reduce risk for investors, thus reducing the yield they require.

Listed Below Are Some Provisions That Are Often Contained in Bond