Concept Questions

7.4a Why might an income bond be attractive to a corporation with volatile cash flows? Can you think of a reason why income bonds are not more popular? 7.4b What do you think would be the effect of a put feature on a bond's coupon? How about a convertibility feature? Why?

Ross et al.: Fundamentals I III. Valuation of Future I 7. Interest Rates and Bond I I © The McGraw-Hill of Corporate Finance, Sixth Cash Flows Valuation Companies, 2002

Edition, Alternate Edition

CHAPTER 7 Interest Rates and Bond Valuation 223

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