1) Which of the following events would make it least likely that a company would choose to call its outstanding callable bonds and why?

A Market interest rates decline sharply. B The companys bonds are downgraded. C Market interest rates rise sharply. D Inflation increases significantly. E The company's financial situation deteriorates significantly.

2) Under normal conditions which of the following would make it more likely to decrease the coupon rate required for a bond to be issued at par?

A) Adding additional restrictive convenants

B) Adding a call provision

C) The rating agencies change the bond's rating from BB to AAA

D) Making the bond a first mortgage bond rather than a debenture

E) Adding a sinking fund