Assume a company plans to make two new bonds issues at the same time. Both will have the same coupon rate and maturity. The firm plans to sell the regular bond at face value, that is, at $1,000 per bond. The second bond will be callable. What must be true about the sale price of this second bond? The price of the bond will have to be lower than $1,000. The price of the bond will have to be higher than $1,000. The price of the bond will have to be equal to $1,000. The price of the bond will be whatever the firm wants it to be. It is not possible to make estimates about the price of the second bond.

Assume a company plans to make two new bonds issues at the same time. Both will have the same coupon rate and maturity. The firm plans to sell the regular bond at face value, that is, at $1,000 per bond. The second bond will be callable. What must be true about the sale price of this second bond? The price of the bond will have to be lower than $1,000. The price of the bond will have to be higher than $1,000. The price of the bond will have to be equal to $1,000. The price of the bond will be whatever the firm wants it to be. It is not possible to make estimates about the price of the second bond.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter20: Hybrid Financing: Preferred Stock, Warrants, And Convertibles

Section: Chapter Questions

Problem 7Q

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