Which of the Following Factors Would Increase the Likelihood That

question 38

Multiple Choice

Which of the following factors would increase the likelihood that a company would call its outstanding bonds at this time?

• A) a provision in the bond indenture lowers the call price on specific dates, and yesterday was one of those dates.
• B) the flotation costs associated with issuing new bonds rise.
• C) the firm's cfo believes that interest rates are likely to decline in the future.
• D) the firm's cfo believes that corporate tax rates are likely to be increased in the future.
• E) the yield to maturity on the company's outstanding bonds increases due to a weakening of the firm's financial situation.

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Definitions:

SONIA

Sterling Overnight Index Average, an interest rate benchmark that represents the average of interest rates paid on overnight unsecured loans in the British sterling market.

LIBOR

The London Interbank Offered Rate, an interest rate average calculated from estimates submitted by the leading banks in London, used as a reference rate for lending and borrowing between banks.

Tokyo Interbank Rate

A benchmark interest rate at which banks lend to each other in the Tokyo interbank market.

Euribor

The interest rate at which banks lend to each other in euros, serving as an important benchmark for various financial instruments in the Eurozone.