All of the Following May Serve to Reduce the Coupon

question 74

Multiple Choice

All of the following may serve to reduce the coupon rate that would otherwise be required on a bond issued at par,except a

• A) Sinking fund.
• B) Restrictive covenant.
• C) Call provision.
• D) Change in rating from Aa to Aaa.
• E) None of the above (all may reduce the required coupon rate).

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Definitions:

Present Benefits

The advantages or positive outcomes that are received or enjoyed at the current time, as opposed to benefits that may accrue in the future.

Future Benefits

Expected advantages or gains that will be received in the future as a result of current investments or actions.

Production Possibility Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs resources and technology, illustrating trade-offs and opportunity costs.

Output Efficiency

The state of producing the maximum output with the minimum wasted effort or expense.