CFA Practice Question

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CFA Practice Question

A firm intends to take on a significant amount of new debt in order to fund the purchase of a close competitor. However, the firm cannot complete the transaction unless it first calls one of its outstanding bond issues. It must be true that the called bonds ______
A. have a higher interest rate than the new bonds will.
B. can be called at a price that is very near par.
C. have covenants which restrict such increase in debt.

User Contributed Comments 2

User Comment
gill15 If the answer C was not an issue....

A ---- would be true right? I'm assuming C just overides A..
rjdelong The word MUST in the question made me choose C over A. A is not a MUST.
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