Amram Inc. can issue a 20-year bond with a 6% annual coupon at par. This bond is not convertible, not callable, and has no sinking fund. Alternatively, Amram could issue a 20-year bond that is convertible into common equity, may be called, and has a sinking fund. Which of the following most accurately describes the coupon rate that Amram would have to pay on the second bond, the convertible, callable bond with the sinking fund, to have it sell initially at par?
A. The coupon rate should be exactly equal to 6%.
B. The coupon rate could be less than, equal to, or greater than 6%, depending on the specific terms set, but in the real world the convertible feature would probably cause the coupon rate to be less than 6%.
C. The rate should be slightly greater than 6%.
D. The rate should be over 7%.
E. The rate should be over 8%.
Answer: B
You might also like to view...
Concealment investigative techniques do not work well in kickback situations. Why?
a. The parties in the transaction will be hard to trace. b. Results of concealment investigative techniques are not admissible as evidence in courts. c. There is usually no direct documentary evidence. d. The risk involved in such investigations is unusually high.
A patent pool is an agreement to exchange licenses
Indicate whether the statement is true or false
The extent of Ray's participation in global business is selling the batteries it manufactures to companies in Spain. In this case, Ray is a(n)
A. trading company. B. importer. C. exporter. D. franchisor. E. contract manufacturer.
One clue to the presence of multicollinearity is an independent variable known to be an important predictor that ends up having a regression coefficient that is not ____________________
Fill in the blank(s) with correct word