Pd member – A corporation is planning to issue new 20 year bonds. Initially the plan was to make the bonds non-callable. If the bonds were made callable after 5 years at a 5% call premium, how would this affect their required rate of return,a. Because of the call premium, the required rate of return would decline,b. There is no reason to expect a change in the required rate of return,c. The required rate of return would decline because the bond would then be less risky to a bondholder,d. The required rate of return would increase because the bond would then be more risky to a bondholder,e. It is impossible to say without more information,
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