Nicholas Industries can issue a 20-year bond with a 6% annual coupon. This bond is...
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Nicholas Industries can issue a 20-year bond with a 6% annual coupon. This bond is not convertible, is not callable, and has no sinking fund. Alternatively, Nicholas could issue a 20-year bond that is convertible into common equity, may be called, and has a sinking fund. Which of the following most accurately describes the coupon rate that Nicholas would have to pay on the convertible, callable bond?
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| a. | It could be less than, equal to, or greater than 6%. |
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| b. | Greater than 6%. |
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| c. | Exactly equal to 8%. |
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| d. | Less than 6%. |
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| e. | Exactly equal to 6%. |
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