Which factor 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.

Question

Quizplus · Accepted Answer

A provision in the bond indenture that lowers the call price on specific dates gives the company an incentive to call its outstanding bonds on those dates, as it can save money on interest payments. None of the other choices provide a clear incentive for the company to call its bonds at this time.

Which Factor Would Increase the Likelihood That a Company Would