The value of option issued to call debt is subtracted from rate of return on callable bond to calculate the rate of return on ____________?
Correct answer: B. non-callable bonds
- A. contributed bonds
- B. non-callable bonds
- C. callable bonds
- D. discounted bonds
Explanation
A callable bond includes a call option that benefits the issuer, so its return is adjusted for the option's value to estimate the return on an otherwise non-callable bond. A non-callable bond has no such early-redemption feature.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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