Which of the Following Is False

question 31

Multiple Choice

Which of the following is false?

• A) Private equity firms often need to borrow the money needed to buy a public corporation.
• B) Once a private equity firm owns a formerly publicly held corporation, they tend to cut costs and enhance efficiency.
• C) Critics of private equity firms say that companies that have too much cash and too little debt become targets for private equity firms to buy.
• D) A private equity firm is a group of investors that takes a privately held corporation and uses an investment banker to turn it into a publicly held corporation.

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Definitions:

Bond Indenture

A legal contract between the bond issuer and the bondholders, detailing the terms of the bond, such as the interest rate, maturity date, and collateral.

BB Credit Rating

Indicates a credit rating assigned by rating agencies to a borrower that signifies higher risk and lower credit quality compared to an investment-grade rating.

Interest Rate Risk Premium

The extra return investors demand for holding an interest-bearing asset, compensating them for the risk of interest rate fluctuations.

Coupon Rate

The annual interest rate paid by a bond expressed as a percentage of the bond's face value.