The firm has correctly calculated the net advantage to refunding it (NA) to be $25,485. In your professional judgment, would a firm go ahead and undertake this refunding?

Question 3

With all else equal, an option on a bond could be

	A.	A call the bondholder has, which increases the bond’s coupon rate
	B.	A put the bondholder has, which lowers the bond’s coupon rate
	C.	A call the issuing firm has, which increases the bond’s coupon rate
	D.	A put the issuing firm has, which lowers the bond’s coupon rate
	E.	A and B
	F.	A and C
	G.	A and D
	H.	B and C
	I.	B and D
	J.	C and D
	K.	all but A
	L.	all but B
	M.	all but C
	N.	all but D
	O.	all are true
	P.	none are true

Question 4

A firm is considering refunding a $400 million debt issue with a lower coupon issue to lower the firm’s cost. The firm has correctly calculated the net advantage to refunding it (NA) to be $25,485. In your professional judgment, would a firm go ahead and undertake this refunding?

	A.	yes
	B.	no

Question 5

A firm has a 28% tax rate and has decided to issue $250 million of 12-year debt. If it makes a U.S. public offering, the offering would carry an 8.5% coupon, paid semi-annually, and issuing would cost $2 million. What is the after-tax cost (APY) of borrowing?

The firm has correctly calculated the net advantage to refunding it (NA) to be $25,485. In your professional judgment, would a firm go ahead and undertake this refunding?

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