Which of the following trends can be unfavorable from the viewpoint of a bondholder?
A)The issuing company's debt ratio is steadily declining.
B)The issuing company's interest coverage ratio is steadily rising.
C)Market interest rates are steadily rising.
D)The issuing company's net cash flow from operating activities is steadily increasing.

Question

Quizplus · Accepted Answer

If market interest rates are steadily rising, the value of existing bonds with lower coupon rates will decrease, resulting in a loss for bondholders if they sell their bonds before maturity. A declining debt ratio, rising interest coverage ratio, and increasing net cash flow from operating activities are usually favorable trends from the viewpoint of a bondholder.

Which of the Following Trends Can Be Unfavorable from the Viewpoint