Question

Question 1:Corporate Bonds Which of the following describes the call feature of a bond?

a- The issuing company may choose to call the bond and require the bondholder to turn in the bond in exchange for receiving the bond's call price.

b- The bondholder may call and request a higher coupon payment in exchange for a deferral of the principal payment date.

c-The issuing company may require the bondholder to exchange their bond for preferred stock.

d-The bondholder has the right to sell the bond back to the issuing company at coupon payment dates.

Question2 :Bond Prices, Coupons and YTMs A $1,000 par bond has a 9% coupon and a 10% ytm. This bond must sell ________________.

a- for the same value as last year's price   b- at its par value c- at a premium d- at a discount

Question 3: Default Protections All but which one of the following will tend to reduce the required yield on a corporate bond?

a- A sinking fund where the issuer may repurchase a given fraction of the outstanding bonds each year.

b- A sinking fund where the issuer sets aside money each year to ensure the bond principal can be repaid when due

c- A requirement that all future debt issues must be subordinated to the current debt.

d- A call provision with a five year deferred call.

Answer 1