Bonds with a High Risk of Default Usually

question 237

Multiple Choice

Bonds with a high risk of default usually:

• A) have a longer maturity than do bonds with a low risk of default.
• B) have a shorter maturity than do bonds with a low risk of default.
• C) have to pay a high rate of interest to attract investors.
• D) can pay a low rate of interest and still attract investors.

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Definitions:

Common Stock

A type of security that represents ownership in a corporation, giving holders voting rights and entitlement to dividends.

Earnings Per Share

A company's net profit divided by the number of its outstanding shares, indicating the profitability on a per-share basis.

Par

This refers to the face value of a bond or stock as stated by the issuing company.

Net Income

After all costs and taxes are removed from revenues, the company's residual profit.