1215

Which of the following is the appropriate redemption price when redemption funds are obtained as a result of a forced sale of assets for deregulatory purposes?

A) Regular redemption price.

B) Special redemption price.

C) General redemption price.

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When redemption funds are obtained as a result of a forced sale of assets for deregulatory purposes, the funds can be used to redeem bonds at the special redemption price, which are typically par value.

1215

Which of the following is the appropriate redemption price when bonds are called according to the sinking fund provision?

A) Specific redemption price.

B) Regular redemption price.

C) Special redemption price.

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Regular redemption price refers to bonds being called according to the provisions specified in the bond indenture. When bonds are redeemed to comply with a sinking fund provision or because of a property sale mandated by government authority, the redemption prices (typically par value) are referred to as "special redemption prices." There is no such thing as a specific redemption price.

1215

Which of the following statements regarding a bond being called is CORRECT? Call prices are known as regular redemption prices when bonds are called at:

A) under the call provisions specified in the bond indenture.

B) at the par value.

C) at a premium.

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When bonds are redeemed under the call provisions specified in the bond indenture, these are known as regular redemptions and the call prices are referred to as regular redemption prices which can be either at a premium or at par.

1215

The refunding provision found in nonrefundable bonds allows bonds to be retired unless:

A) the funds come from a lower cost bond issue.

B) the funds come from the sale of new common stock.

C) market interest rates have increased substantially.

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Refunding from a new debt issue at a higher interest rate is not prohibited, however their purchase cannot be funded by the simultaneous issuance of lower coupon bonds.