Describe the effect of each of the following bond features on the coupon rate of a bond.

Owners of a company have decided to expand their operations. They have hired you to be a financial analyst, to help with the underwriting process to help sell $100 million in new 10-year bonds to finance a new plant.  The owners of the company do not know what the bond features or the coupon rate the company would likely have.

Although you are aware of bond features, you are uncertain as to the costs and benefits of some features, but the owners of the firm have asked you to prepare a report to the owners describing the effect of each of the following bond features on the coupon rate of a bond.  They would also like for you to explain the advantages and disadvantages of each feature.

The memo needs to address the following –

  1. The security of the bond
  2. The seniority of the bond
  3. The presence of a sinking fund
  4. A call provision with specified call dates and call price
  5. A deferred call accompanying the above call provision
  6. A make whole call provision
  7. Any positive covenants
  8. Any negative covenants
  9. A conversion feature on the non-public company
  10. A floating coupon.

Instructions –

The assignment should be done in a term paper format with appropriate appendixes when required.  Your paper should demonstrate thoughtful consideration of the ideas and concepts presented in the chapters and provide new thoughts and insights relating directly to this topic. Your response should reflect scholarly writing and current APA standards. Be sure to adhere to University’s Academic Integrity Policy.

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