Which of the following is FALSE? Companies are not likely to call bonds unless interest rates have declined significantly. Thus, the call provision is detrimental to firms but valuable to long term investors. On balance, bonds that have a sinking fund are regarded as being safer than those without such a provision. Long-term bond prices are more sensitive than short-term bond prices to interest rate changes. If interest rates rise, the price of the bond will fall. Which of the following is Correct? If a bond's price increases, its YTM (yield to maturity) decreases. O Convertibles and bonds with warrants are offered with higher coupons than similarly-rated straight bonds. Assuming a bond issue is callable, the YTM (yield to maturity) is a better estimate of a bond's expected return when the YTM (yield to maturity) is below an outstanding bond's coupon rate. A call for sinking fund purposes is not different from a refunding call. Just like the refunding call, a sinking fund call requires a call premium. Which of the following is Correct? If a company decides to fulfil its sinking funds requirement through selecting the bonds to be called by a lottery administered by the trustee, the price paid is the bond's market price. As a general rule, a company's debentures have higher required interest rates than its mortgage bonds because mortgage bonds are backed by specific assets while debentures are unsecured. A call provision gives bondholders the right to demand, or "call for," repayment of a bond. Typically, companies call bonds if interest rates rise and do not call them if interest rates decline. If a company decides to fulfil its sinking funds requirement through selecting the bonds to be called by a lottery administered by the trustee, the price paid is the bond's face value plus some premium. A zero coupon bond is a bond that pays no interest and is offered (and initially sells) at par