Which of the following would be most likely to increase the coupon rate that is
ID: 1172536 • Letter: W
Question
Which of the following would be most likely to increase the coupon rate that is required to enable a bond to be issued at par? (Hint: If a bond feature is NOT to the bondholders’ advantage, the bond issuer needs to increase its return (e.g., coupon rate) in order to attract investors to buy this bond.)
Adding additional restrictive covenants that limit management's actions.
Making the bond a first mortgage bond rather than a debenture.
Adding a sinking fund.
Adding a call provision.
The rating agencies change the bond's rating from Baa to Aaa.
A.Adding additional restrictive covenants that limit management's actions.
B.Making the bond a first mortgage bond rather than a debenture.
C.Adding a sinking fund.
D.Adding a call provision.
E.The rating agencies change the bond's rating from Baa to Aaa.
Explanation / Answer
Adding a call provision.
the above is answer..
because call provision is benefit to issuer so premium to bond coupon rate is added
D.Adding a call provision.
the above is answer..
because call provision is benefit to issuer so premium to bond coupon rate is added
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