Which of the following statements is FALSE?
A) The holder of a callable bond faces reinvestment risk precisely when it hurts: when market rates are lower than the coupon rate she is currently receiving.
B) When yields have risen, the issuer will not choose to exercise the call on the callable bond.
C) The issuer will exercise the call option only when the prevailing market rate exceeds the coupon rate of the bond.
D) A callable bond is relatively less attractive to the bondholder than the identical non-callable bond.
Answer: C
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Which of the following is a professional service enterprise?
a. Bookstore; b. Veterinary clinic; c. Pharmacy; d. Recording studio; e. All of these are professional service enterprises
What is the present value of the following cash flow stream at a rate of 12.0%?
?
A. $9,699 B. $10,210 C. $10,747 D. $11,284 E. $11,849
The firm's cost of preferred stock is ________. (See Table 9.1 )
A) 7.2 percent B) 8.3 percent C) 13.3 percent D) 13.9 percent
Which of the following actions will DECREASE the present value of an investment?
A) Decrease the interest rate. B) Decrease the future value. C) Decrease the amount of time. D) All of the above will decrease the present value.