Financial Management - Study Mode

[#826] Right held with corporations to call issued bonds for redemption is considered as
Correct Answer

(B) call provision

Explanation

Solution: Right held with corporations to call issued bonds for redemption is considered as call provision. A call provision is a provision on a bond or other fixed-income instrument that allows the issuer to repurchase and retire its bonds.

[#827] Bond that has been issued in very recent timing is classified as
Correct Answer

(C) new issue

Explanation

Solution: Bond that has been issued in very recent timing is classified as new issue. A new issue is a reference to a security that has been registered, issued, and is being sold on a market to the public for the first time. The term does not necessarily refer to newly issued stocks, although initial public offerings (IPOs) are the most commonly known new issues.

[#828] Type of options that permit bond holder to buy stocks at stated price are classified as
Correct Answer

(C) warrants

Explanation

Solution: Type of options that permit bond holder to buy stocks at stated price are classified as warrants. Warrants are a derivative that give the right, but not the obligation, to buy or sell a security most commonly an equity at a certain price before expiration. The price at which the underlying security can be bought or sold is referred to as the exercise price or strike price.

[#829] When price of bond is calculated below its par value, it is classified as
Correct Answer

(B) discount bond

Explanation

Solution: When price of bond is calculated below its par value, it is classified as discount bond. A discount bond is a bond that is issued for less than its par or face value. Discount bonds may also be a bond currently trading for less than its face value in the secondary market. A bond is considered a deep-discount bond if it is sold at a significantly lower price than par value, usually at 20% or more.

[#830] Required rate of return in calculating bond's cash flow is also classified as
Correct Answer

(D) Both A and B

Explanation

Solution: Required rate of return in calculating bond's cash flow is also classified as going rate of return and yield.