Question 2 (12 marks)

DBT Inc. is a newer company and needed to raise some funding by issuing some bonds. DBT issued bonds with the following details:

Face value $500,000

Stated interest rate 5%

Market interest rate 4%

Maturity date January 1, 2024.

Date of issuance January 1, 2021

Call price 106

Interest payments are due annually on January 1 starting in 2022

Method of amortization is the effective interest method

Required:

(e) List at least four (4) qualitative factors considered in determining the riskiness of long-term debt?