Tucker Corporation is planning to issue new 20-year bonds. The current plan is to make the bonds non-callable, but this may be changed. If the bonds are to be made callable after 5 years at a 5% call premium, how would this affect their required rate of return?
a) The required rate of return would decrease because investors benefit from the call feature.
b) There is no reason to expect a difference in the required rate of return.
c) The required rate of return would decrease because the bond would then be less risky to a bondholder.
d) The required rate of return would increase because the call feature would limit the potential for a significant increase in bond price.
e) It is impossible to say without more information.