Question
You are comparing three different bond issues from a single firm: Issue A: Grants the issuer the right, but not obligation, to repurchase bonds prior
You are comparing three different bond issues from a single firm:
Issue A: Grants the issuer the right, but not obligation, to repurchase bonds prior to their stated maturity
Issue B: Includes a provision that allows bondholders to redeem bonds at a stated price prior to maturity
Issue C: Allows bondholders to exchange bonds for shares of the issuers common stock
What general features of bonds do these issues exemplify and, all else equal, which bond is likely to have the highest yield to maturity (i.e. required return)?
Answer choices:
Income; Extend; Float; Issue C
Put; Call; Swap; Issue B
Call; Put; Conversion; Issue A
Purchase; Redeem; Exchange; Issue B
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