CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

A bond indenture specifies that the 8% issue of Canton Corp. due June, 2020 is redeemable at par value in the event of a merger. The bond is callable after December 31, 2018 at 103. In the event of a merger between Canton Corp. and a suitor company, owners of this issue will receive ______.

A. the market price
B. par value
C. 103% of par value
Correct Answer: B

Owners of the issue will receive par value because of the provision specified in the bond indenture.

User Contributed Comments 7

User Comment
danlan What is the par value specified in bond indenture?
mtcfa It must be 100.
steved333 It doesn't matter. The indenture says par. Par is par.
krisscfa In the event of a merger between Canton Corp and a suitor company owners of this issue will receive....

Canton Corp and a suitor company will pay the bond holders the PAR Value...and the bond holders are not the owners of the company...makes sense??
krisscfa oops owners of this issue...correct
MattNYC The call is also specified in the bond indenture. The question is really very simple, and the 103 call is not even relevant. I HATE these!!
alejandroc Canton does have the option to call at 103%. But it's better for Canton to repay at par value!
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