Nicholas Industries Can Issue a 20-Year Bond with a 6

question 40

Multiple Choice

Nicholas Industries can issue a 20-year bond with a 6% annual coupon.This bond is not convertible, is not callable, and has no sinking fund.Alternatively, Nicholas could issue a 20-year bond that is convertible into common equity, may be called, and has a sinking fund.Which of the following most accurately describes the coupon rate that Nicholas would have to pay on the convertible, callable bond?

• A) It could be less than, equal to, or greater than 6%.
• B) Greater than 6%.
• C) Exactly equal to 8%.
• D) Less than 6%.
• E) Exactly equal to 6%.

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