Which of the Following Statements Is FALSE

question 87

Multiple Choice

Which of the following statements is FALSE?

• A)If the call provision offers a cheaper way to retire the bonds, the issuer will forgo the option of purchasing the bonds in the open market and call the bonds instead.
• B)To understand how call provisions affect the price of a bond, we first need to consider when an issuer will exercise its right to call the bond.
• C)When bond yields have increased, by exercising the call on the callable bond and then immediately refinancing, the issuer can lower its borrowing costs.
• D)An issuer can always retire one of its bonds early by repurchasing the bond in the open market.

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Definitions:

Command Systems

Economic systems where the government controls key sectors of the economy, determining what goods are produced, their prices, and distribution.

Invisible Hand

A term coined by Adam Smith to describe the self-regulating nature of the marketplace, where individuals' pursuit of self-interest leads to the benefit of society at large.

Adam Smith

An 18th-century Scottish economist known as the father of modern economics, best remembered for his theory of the invisible hand.