Which of the Following Statements Is Most Accurate

question 81

Multiple Choice

Which of the following statements is most accurate?

• A)Before the call date,investors anticipate the optimal strategy that the issuer will follow,and the bond price reflects this strategy.
• B)The yield to maturity of a callable bond is calculated as if the bond were called at the earliest opportunity.
• C)A callable bond will trade at a higher price (and therefore a lower yield)than an otherwise equivalent non-callable bond.
• D)A firm raising capital by issuing callable bonds instead of non-callable bonds will be able to pay a lower coupon rate.
• E)When the bond's coupon rate is below the yield for similar securities,the bond is likely to be called.

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Definitions:

Government Agency

An organization part of the government, established to perform specific functions or services.

Condition Precedent

A condition precedent is a condition or event that must occur before a party is required to perform a contractual obligation or before a contract becomes effective.

Contractual Obligation

A legal duty borne out of a contract, requiring a party to act or refrain from acting in a certain way.

Uncertain Future Event

An uncertain future event is an event or occurrence that may or may not happen, impacting plans, decisions, and outcomes depending on its eventual realization or lack thereof.