Which of the following factors would increase the likelihood that a company would call its outstanding bonds at this time?

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

Question

Which of the following factors would increase the likelihood that a company would call its outstanding bonds at this time?

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

Quizplus · Accepted Answer

A provision in the bond indenture lowering the call price on specific dates would make it financially advantageous for the company to call its bonds, as it reduces the cost of calling the bonds.

Which of the Following Factors Would Increase the Likelihood That