56. Omega Corp. has outstanding a $100 million, 9 percent coupon bond issue that is refund protected until 1 July 2010. This issue:

Select exactly 1 answers from the following:
A. is noncallable.
B. is call protected until 1 July 2010.
C. currently may be redeemed with funds from general operations.
D. currently may be redeemed but only if refunded by an issue with a lower cost.
答案和详解如下！
Feedback: Correct answer: C

Fixed Income Analysis for the Chartered Financial Analyst Program, 2nd edition, Frank J. Fabozzi (Frank J. Fabozzi Associates, 2004), pp. 13?5

2006 Modular Level I, Vol. IV, pp. 19-20

Study Session 14-62-c

explain the provisions for early retirement of debt, including call and refunding provisions, prepayment options, and sinking fund provisions, differentiate between a regular redemption price and a special redemption price and explain the importance of options embedded in a bond issue, and indicate whether such options benefit the issuer or the bondholder

A bond issue that is nonrefundable prohibits the borrower from obtaining lower-cost funds to pay off the bonds. The holder of the bonds is protected from early redemption only if interest rates decline.

Correct answer: C

b

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