The Following Are Some of the Complications Associated with Call

question 3

Multiple Choice

The following are some of the complications associated with call provisions of bonds:
I. the firm may be prevented from calling bond because of non-refunding clause from issuing new debt.
II. the call premium is a tax-deductible expense for the firm but is taxed as capital gains to bondholders.
III. there may be other tax consequences to both the firm and the bondholders from replacing a low-coupon bond with a higher-coupon bond.
IV. there are costs and delays associated with calling and reissuing debt.

• A) I only
• B) I and II only
• C) I, II and III only
• D) I, II, III and IV

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Definitions:

Sunday

The day of the week considered the first day by some cultures and calendars and the seventh day by others, often associated with rest and religious activities.

Real Defenses

Legitimate legal defenses that can be raised against the enforcement of a negotiable instrument, including fraud, duress, or illegality.

Fraudulent Alteration

The illegal modification of a document with the intent to deceive or harm others.

Forgery

The act of falsely making or altering a document with the intent to defraud.