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Which of the Following Events Would Make It More Likely That a Company Would Call a Callable Bond?

FAQs william August 6, 2022

Which of the following events would make it more likely that a company would call its outstanding callable bonds? All other things being equal, if interest rates rise, the price of bonds will fall. You have just completed 20 semesters!

Which of the following events would make it more likely that a company would call its outstanding callable bonds Group of answer choices?

The correct answer is B. A company is more likely to call its callable bonds if market interest rates fall sharply. The company refinances the debt by issuing new bonds at a lower interest rate.

Which of the following occurrences would increase the chances that a firm calls its outstanding callable bonds?

Which of the following events would increase the likelihood that a company would call its outstanding callable bonds? There is a sharp drop in market interest rates.

Can a bond be called before call date?

A call date refers to the date on which a callable bond may be redeemed prior to its maturity date at a specified call price. There may be more than one call date on which the issuer has the right to redeem the bond early before the bond’s maturity date.

In which situation is a corporation most likely to call buy back a bond?

In what situation is a company most likely to call (buy back) a bond? Buy the bond at a discount to the face value of the bond. Which product counts as an investment?

Which is riskier to an investor other things held constant a callable bond or a putable bond?

What is more risky for an investor, other things being constant, a callable bond or a callable bond? To explain. Callable bonds are riskier because they give the issuer the right to repay the debt before it is due. If a bond is redeemed before a maturity date that it does not meet, there will be a larger change in loss.

When would the issuer be likely to initiate a refunding call?

When would the issuer likely initiate a redemption request? 7-9 If a company sold bonds when interest rates were relatively high and the issue is callable, then the company could sell a new issue of low-yielding securities when interest rates fall. p >

When might a company call their callable bonds?

An issuer may call a bond if current interest rates fall below the bond’s interest rate. This allows the issuer to save money by paying off the bond and issuing another bond at a lower interest rate. This is similar to refinancing the mortgage on your home, allowing you to make lower monthly payments.

How do you know if a bond is callable?

A callable – redeemable – bond will typically be called at a value slightly above the face value of the debt. The earlier in the term of a bond a bond is called, the higher its call value. For example, a bond maturing in 2030 may be called in 2020. It may have a cancelable price of 102.00.

What does callable mean?

Definition of callable

: callable specifically : subject to a request for submission of payment callable bond.

References:

  1. https://study.com/academy/answer/which-of-the-following-events-would-make-it-more-likely-that-a-company-would-call-its-outstanding-callable-bonds-a-the-company-s-financial-situation-deteriorates-significantly-b-market-interest-rates-decline-sharply-c-market-interest-rates-rise-sha.html
  2. https://quizlet.com/517406063/gb550-quizes-flash-cards/
  3. https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/call-date/
  4. https://quizlet.com/397816715/wise-test-economics-review-flash-cards/
  5. https://quizlet.com/537630753/fin-test-2-ch6-9-flash-cards/
  6. https://quizlet.com/144435370/chapter-7-bonds-and-their-valuation-flash-cards/
  7. https://www.investor.gov/introduction-investing/investing-basics/glossary/callable-or-redeemable-bonds
  8. https://www.investopedia.com/terms/c/callablebond.asp
  9. https://www.merriam-webster.com/dictionary/callable

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