Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 15, Problem 6CQ
Call Provisions A company is contemplating a long-term bond issue. It is debating whether to include a call provision. What are the benefits to the company from including a call provision? What arc the costs? How do these answers change for a put provision?
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Which of the following is the best explanation of what the call premium is?
Group of answer choices
The amount above the face value an investor must pay to purchase the bond.
The additional amount above the face value that the company must pay to repay the bond early.
The additional amount above the market price that a company must pay to repay the bond early.
The amount above the market price that an investor must pay to purchase the bond.
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Explain three reasons why a company will prefer long-term borrow to short-term borrow
Chapter 15 Solutions
Corporate Finance
Ch. 15 - Bond Features What are the main features of a...Ch. 15 - Prob. 2CQCh. 15 - Preferred Stock Preferred stock doesnt offer a...Ch. 15 - Preferred Stock and Bond Yields The yields on...Ch. 15 - Prob. 5CQCh. 15 - Call Provisions A company is contemplating a...Ch. 15 - Prob. 7CQCh. 15 - Preferred Stock Do you think preferred stock is...Ch. 15 - Long-Term Financing As was mentioned in the...Ch. 15 - Internal versus External Financing What is the...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- What is a call provision? Why do companies often include call provisions on bond issues?arrow_forwardHow does a company determine the interest rate it uses in making a netpresent value (NPV) decision?arrow_forwardHow is the appropriate cost of debt for a new project determined when a company has several bond issues outstanding with varying maturities?arrow_forward
- Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a company. A company earns a higher return with borrowed funds than it pays in interest.arrow_forwardYou want to invest in a company that guarantees your money's interest payments and returns at the maturity date as an investor. Which is the best option for this investment? a. bonds b. stocks c. stocks and bonds d. neither stocks nor bondsarrow_forwardWhat is duration gap model? Explain the concept of duration. How duration measure can be used to protect a financial intermediary against interest rate risk?arrow_forward
- Thinking about various payment terms for Accounts Payable, do you feel it is always valuable for a company to offer early payment discounts, and does this answer change based on the going prime rate?arrow_forward21. Which of the following is a source of short-term financing? Group of answer choices Issue Long Term Bonds Issue New Stock Factoring Accounts Receivablearrow_forward
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