Chances that firm calls its outstanding callable bonds

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Reference no: EM132059162

1. Which of the following occurrences would increase the chances that a firm calls its outstanding callable bonds?

a) The company’s bonds are downgraded by Standard and Poor’s.

b) There is a significant increase in interest rates.

c) There is a sharp decline in market interest rates.

d) There is a significant deterioration in the firm’s financial position.

2. According to the Capital Asset Pricing Model, the relevant risk of a stock is that stock’s contribution of risk to the risk of a well-diversified portfolio.

a) True

b) False

3. Since floating-rate debt shifts interest rate risk to firms, it would be disadvantageous to issuers.

True or false

Reference no: EM132059162

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