Question 5.6: A company has in issue a 10 per cent bond, redeemable at the...
A company has in issue a 10 per cent bond, redeemable at the option of the company between one and five years from now. What factors will be considered by the company in reaching a decision on when to redeem the bond?
The company will consider the length of time remaining to maturity: the general level of interest rates and the term structure of interest rates; the rate of return on other securities, especially ordinary equity; expectations of likely movements in interest rates and inflation rates and the required return of investors in debentures.
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