Tucker Corporation is planning to issue new 20-year bonds. Initially, the plan was to make the bonds non-callable. If the bonds were made callable after 5 years at a 5% call premium, how would this affect their required rate of return?
a Because of the call premium, the required rate of return would decline.
b There is no reason to expect a change in the required rate of return.
c The required rate of return would decline because the bond would then be less risky to a bondholder.
d The required rate of return would increase because the bond would then be more risky to a bondholder.
e It is impossible to say without more information.