7 met ID: A S Tader nomal conditoes, which of the followving woald tbe most lidely to increase the coupon rait for a bond to be issued ot par Alding additional restrictive covenants that limit management's actions. Adding a call provision Thr tating agencies change the bond's rating from Baa to Aaa, d. Making the bond a firt mortgage bond rather than a debenture Adding a sinking fund 9. Which of the following statements is CORRECt? maturity premioms embedded in the interest rates on U.S. Treasury securities are due primarily to the fact that the probability of default is higher on long-term bonds than on short-term bonds b) Reinvestmest raxe risk is lower. other things held constant, on long-term than on e. The pure expectations theory of the term structure states that borrowers generally prefer short-term bonds. to borrow on a long-term basis while savers generally prefer to lend on a short-term basis, and as a result, the yield curve is normally upward sloping. If the maturity risk premium were zero and interest rates were expected future, then the yield curve for U.S. Treasury securities would, other constant, have an upward slope. to decrease in the d. e. Liquidity premiums are generally higher on Treasury than on corporate bonds 10 Which of the following events would make it more likely that a company would call its outstanding callabl bonds? a. The company's bonds are downgraded. b. Market interest rates rise sharply Market interest rates decline sharply The company's financial situation deteriorates significantly e. Inflation increases significantly -0 11. The preemptive right is important to shareholders because i a. allows managers to buy additional shares below the current market price. will result in higher dividends per share. is included in every corporate charter. b. d) protects the current shareholders against a dilution of their ownership interests e. protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate