The firm uses bonds rather than a term loan

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What effect do you think each of the following items should have on the interest rate that a firm must pay on a new issue of long-term debt? Indicate whether each factor would tend to raise, lower, or have an indeterminate effect on the interest rate, and then explain why. a) The firm uses bonds rather than a term loan. b) The firm uses debentures rather than first mortgage bonds. c) The firm makes its bonds convertible into common stock. d) The firm puts a call provision on its new issue of bonds. e) The firm includes a sinking fund on its new issue of bonds. f) The firm’s bonds are downgraded from A to BBB.

Reference no: EM131016217

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