Under Normal Conditions, Which of the Following Would Be Most

question 95

Multiple Choice

Under normal conditions, which of the following would be most likely to increase the coupon rate required to enable a bond to be issued at par?

• A) Adding additional restrictive covenants that limit management's actions.
• B) Adding a call provision.
• C) The rating agencies change the bond's rating from Baa to Aaa.
• D) Making the bond a first mortgage bond rather than a debenture.
• E) Adding a sinking fund.

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Definitions:

Opportunity Costs

The potential benefits missed out on when choosing one alternative over another.

Fixed Overhead

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Special Offer

A promotional deal or discount aimed at encouraging consumers to buy a product or service.

Direct Materials

The raw materials that can be directly traced to the manufacturing of a product.