Some of the following features would increase the value of a corporate bond (i.e., lower borrowing costs) and

others would reduce the bond value (i.e., higher borrowing costs). Choose from the following two options and

explain why it is the case:

(A) Increase bond value

(B) Reduce bond value

1. The borrowing company has the option to repay the loan before maturity.

ANSWER: _____ (A or B)

The reason is _________________.

2. The bond is convertible into the shares of the same company's common stock.

ANSWER: _____ (A or B)

The reason is _________________.

3. The collateral bond is secured by a real estate property owned by the same company.

ANSWER: _____ (A or B)

The reason is _________________.

4. The bond is subordinated (i.e., not a senior debt).

ANSWER: _____ (A or B)

The reason is _________________.