An 8 Percent Debenture Has Five Years of Call Protection

question 56

Multiple Choice

An 8 percent debenture has five years of call protection and is thereafter callable at 100 percent, except that it is nonrefundable below interest cost. Which of the following statements is correct?

• A)The debenture may be called any time during the next five years.
• B)The debenture may not be called during the next five years.
• C)The lender has the option to demand early repayment.
• D)The bond should be called when the yield on similar noncallable bonds falls to 8 percent.

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Definitions:

Salvage Value

The estimated resale value of an asset at the end of its useful life.

Legal Owner

The person or entity that has legal title or ownership of property or assets.

Tax Benefits

Financial advantages that result from specific tax law provisions, often designed to encourage certain business investments or activities.

Original Investment

This refers to the initial amount of money invested in a project, asset, or financial instrument.