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.
A) 1, 4, 6
B) 1, 2, 3, 4, 6
C) 1, 2, 3, 4, 5, 6
D) 1, 3, 4, 5, 6
E) 1, 3, 4, 6

Question

Quizplus · Accepted Answer

Providing security, convertibility, a sinking fund, and covenants limiting additional debt reduce risk for investors, thus lowering the required yield.

Listed Below Are Some Provisions That Are Often Contained in Bond