Tucker Corporation Is Planning to Issue New 20-Year Bonds

question 42

Multiple Choice

Tucker Corporation is planning to issue new 20-year bonds.The current plan is to make the bonds non-callable,but this may be changed.If the bonds are made callable after 5 years at a 5% call premium,how would this affect their required rate of return?

• A) Because of the call premium,the required rate of return would decline.
• B) There is no reason to expect a change in the required rate of return.
• C) The required rate of return would decline because the bond would then be less risky to a bondholder.
• D) The required rate of return would increase because the bond would then be more risky to a bondholder.
• E) It is impossible to say without more information.

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Definitions:

Enlargements

Increases in size or volume of an organ or structure, often due to cell growth or accumulation of materials.

Spinal Cord

The long, thin, tubular structure made up of nervous tissue, which extends from the brainstem to the lower back, carrying nerve impulses between the brain and the rest of the body.

Dorsal Root

Sensory (afferent) root of a spinal nerve.

Posterior Horn

A section of the spinal cord grey matter involved in sensory processing.