Reference no: EM133171031

Question - Mary Smith is the owner of US Global has decided to expand company operations. Mary has instructed a newly hired financial analyst, Tina Tate, to enlist an underwriter from an investment bank to help sell $35 million in new 10-year bonds to finance construction and future growth for US Global. Tina Tate has entered into discussions with Tony Tuttle, an underwriter from the Investment Bank of Crete about which bond features. US Global should consider what the coupon rates the bond issue will likely have.

Although Tina Tate is aware of the bond features, she is uncertain about the costs and benefits of some features. Tina isn't sure how each feature would affect the coupon rate of the bond issue. Tony Tuttle is writing a memo to Tina Tate describing the effects of each of the following bond features on the coupon rate of the bond, including advantages and disadvantages of each feature.

As Tony Tuttle, you will describe a memo to Tina Tate at US Global, answering each of the following questions about a potential bond issue for US Global. These should be answered in paragraph format within the memo and not answered directly as a question:

The security of the bond - that is, whether the bond has collateral and how this would affect the coupon rate.

1. The seniority of the bond and how this would affect the coupon rate.

2. The presence of a sinking fund and how this would affect the coupon rate.

3. A call provision with specified call dates and call prices and how this would affect the coupon rate.