Which of the Following Would Be Likely to Result in Liability

question 82

Multiple Choice

Which of the following would be likely to result in liability to a director of a textile company? The director:

• A) sells stock in the textile company before a merger is announced.
• B) buys stock in the textile company using the computer in the office of the company.
• C) owns stock in an automobile company.
• D) agrees to hire as president a man he has not personally investigated.

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Definitions:

Maturity

The date on which the principal amount of a financial instrument, such as a bond or loan, is due to be repaid.

Investment Grade

Refers to the quality of a company's credit. To be considered investment grade, a company's debt must be rated at BBB- or higher by Standard and Poor's, or Baa3 or higher by Moody's.

Standard & Poor's

A financial market intelligence company known for its stock market indices such as the S&P 500, as well as its credit ratings of borrowers.

Liquidity Preference Theory

A theory that suggests investors demand a higher interest rate or premium on securities with longer maturities to compensate for the increased risk of holding them.