When Would It Make Sense for a Firm to Call

question 43

Multiple Choice

When would it make sense for a firm to call a bond issue and refinance?

• A)when the market price of the bond exceeds the call price,and market interest rates are greater than the bond's coupon rate
• B)when the market price of the bond exceeds the call price,and market interest rates are less than the bond's coupon rate
• C)when the market price of the bond is less than the call price,and market interest rates are greater than the bond's coupon rate
• D)when the market price of the bond is less than the call price,and market interest rates are less than the bond's coupon rate

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Definitions:

Two-Tailed

In hypothesis testing, it refers to the methodology that considers both directions of a possible effect, allowing for investigation of deviations in two opposite directions from the null hypothesis.

Pearson Correlation

A metric that quantifies the linear relationship between two variables, providing a value in the range of -1 to 1.

Negative Number

A number less than zero, typically represented with a minus sign in front, indicating a value opposite to its positive counterpart.

Null Hypothesis

A hypothesis that there is no significant difference or effect, typically used as a starting assumption in hypothesis testing.