a. false because callable bonds will sell for a higher yields than a noncallable bonds, if all other things are held constant.
b. correct.
c. false. As Interest expense accures for tax purposes on zero coupon bonds, so firms can realize the tax savings from the issuing debt.
d. correct.
e. false. Firms prefer the less expensive options of calling the bond
. oWhich of the following statements is CORRECT O a other things held constant, a callable bond s...
Which of the following is correct? A. Once a firm declares bankruptcy, it is liquidated by the trustee, who uses the proceeds to pay bond holders, unpaid wages, and lawyer fees. B. A firm with a sinking fund payment coming due would generally choose to buy back bonds in the open market, if the price of the bond exceeds the sinking fund call price. C. Income bonds pay interest only when the firm has sufficient income to cover the interest...
Question 5 A callable bond O is generally call protected during the entire term of the bond issue. O generally will have a call protection period during the final three years prior to maturity. O may be structured to pay bondholders the current value of the bond on the date of call. O is prohibited from having a sinking fund also is frequently called at a price that is less than par value.