Other Things Held Constant, If a Bond Indenture Contains a Call

question 42

Multiple Choice

Other things held constant, if a bond indenture contains a call provision, the yield to maturity that would exist without such a call provision will generally be _________________ the YTM with it.

• A) higher than
• B) lower than
• C) the same as
• D) either higher or lower, depending on the level of call premium, than
• E) unrelated to

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Definitions:

Monopsony Power

A market situation in which there is only one buyer for a product or service, giving that buyer substantial control over market conditions.

Deferred Benefit Plan

A type of retirement plan in which employees receive benefits, such as pension income, at a later date following years of service, rather than receiving these benefits during their active employment.

Demand And Supply Diagram

A graphical representation that displays the relationship between the price of a good and the quantity of the good that suppliers are willing and able to supply and demanders are willing and able to purchase.

Equilibrium Price

The equilibrium price where the demand for a product matches its supply, ensuring market balance.