650 questions 11 and 12 Assignment Example | Topics and Well Written Essays - 500 words

650 questions 11 and 12 - Assignment Example This provision is made in the marketable bonds so as to attract the investors. If at any point of time the provisions regarding the make whole call are ever invoked then the bondholder is subject to a lump sum payment much earlier than anticipated. Thus investors are usually made whole with the make whole call provision (Capital Advisors Group, Inc., 2004, p.1). The regular bonds of the company bears the interest payment which is usually absent in case of a zero coupon bonds. Again the bond holder of a zero coupon bond receives only the face value of the bond at its maturity. However the regular bondholder receives the coupon paid over the life of the bonds along with the face value of the bond. Thus it is better to opt for the regular bond of the company as the distribution of interest of the bond may change as per the market condition but such a probability is not available in case of the zero coupon bond. Under the typical call option facilitates the issuer to gain advantage through the prepayments of debt with the decline in the market yields. In case of settlement the ordinary call option is usually less than the fair value of the debt. Contrarily, the make-whole call option is obtained through the discounting of the remaining contract of the debt at an appropriate treasury rate. Thus it is always better to opt for the make-whole call than an ordinary call as the advantage at the time of settlement is more for make-whole than ordinary shares. The company should not pursue international sales further because if the financial exposures of the company results in the exchange rate rising from $0.73/â‚ ¬ to $0.80/â‚ ¬ it may tend to be cause of dilemma for the company. With the rise in the exchange rate the cost of the product will also raise leading to the increase in the prices of the product. As per the law of demand, the rise in the prices of the product leads to decrease in its demand. Further