A Firm Intends to Take on a Significant Amount of New

Multiple Choice

A firm intends to take on a significant amount of new debt in order to fund the purchase of a close competitor. However, before it can complete the transaction, the firm must call one of its outstanding bond issues. It is plausible that the called bonds:

A) Are backed by the corporation's fixed assets.
B) Have a higher interest rate than the new bonds will.
C) Have an inferior tax status than the new bonds will.
D) Can be called at a price that is very near par.
E) Have covenants which restrict such increase in debt.