Which of the Following Statements Is NOT CORRECT

question 11

Multiple Choice

Which of the following statements is NOT CORRECT?

• A) The expected return on a corporate bond must be less than its promised return if the probability of default is greater than zero.
• B) All else equal, senior debt has less default risk than subordinated debt.
• C) A company's bond rating is affected by its financial ratios and provisions in its indenture.
• D) Under Chapter 11 of the Bankruptcy Act, the assets of a firm that declares bankruptcy must be liquidated, and the sale proceeds must be used to pay off its debt according to the seniority of the debt as spelled out in the Act.
• E) All else equal, secured debt is less risky than unsecured debt.

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Definitions:

Business Communication

Business communication encompasses the sharing of information between people within and outside a company, using various methods such as emails, reports, and presentations, to achieve business objectives.

Senior Management

High-level executives of an organization responsible for strategic decision-making and overseeing operations.

Favourable Impression

A positive opinion or feeling formed about someone or something, based on perceived qualities or actions.

Comprehensive Message

A message that is thorough and fully covers a topic, leaving no relevant part unaddressed.