Which One of the Following Statements Is Correct Concerning a Callable

question 80

Multiple Choice

Which one of the following statements is correct concerning a callable bond that is currently selling below face value? Assume there is no risk of default. Also assume the issuer only calls bonds when they can be refinanced at a lower rate of interest.

• A)The bond will most likely be called while the bonds are selling at a discount.
• B)The yield to maturity is presently more relevant to an investor than the yield to call.
• C)The bond is likely going to be called due to the low current interest rates.
• D)The bond is currently paying a premium.
• E)The bond issue will most likely be replaced with a new bond issue.

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Definitions:

Invalid Assignment

The transfer of rights or benefits under a contract that is not permitted or recognized by law, rendering it void.

Consideration

Something of value exchanged between parties in a contract, required for the agreement to be legally binding.

Liability Insurance

A form of insurance coverage that protects an individual or business from the risk associated with being found legally liable for various kinds of wrongs such as accidents or injuries.

Implied Warranty

A legal term referring to a warranty that is not expressly stated but is assumed by law to exist in a sale.