medium · Debt Capital Markets bond-instruments-structures
A corporate treasurer is deciding between issuing a 5-year bullet bond or a 5-year bond callable after 2 years. The treasurer should choose the callable bond if they believe:
- Interest rates will fall significantly in 2 years, allowing them to refinance at a lower cost.
- Interest rates will rise, making the fixed coupon more attractive to keep.
- The company's credit rating will be downgraded.
- They will have no excess cash in 2 years.
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