ignoring credit quality identify four features of these issues that might account fo 665583
Assume that two firms issue bonds with the following characteristics. Both bonds are issued at par.
ABC Bonds |
XYZ Bonds |
|
Issue size |
$1.2 billion |
$150 million |
Maturity |
10 years* |
20 years |
Coupon |
9% |
10% |
Collateral |
First mortgage |
General debenture |
Callable |
Not callable |
In 10 years |
Call price |
None |
110 |
Sinking fund |
None |
Starting in 5 years |
Ignoring credit quality, identify four features of these issues that might account for the lower coupon on the ABC debt. Explain.