Which of the Following Statements Is CORRECT

question 90

Multiple Choice

Which of the following statements is CORRECT?

• A) Senior debt is debt that has been more recently issued,and in bankruptcy it is paid off after junior debt because the junior debt was issued first.
• B) A company's subordinated debt has less default risk than its senior debt.
• C) Convertible bonds generally have lower coupon rates than non-convertible bonds of similar default risk because they offer the possibility of capital gains.
• D) Junk bonds typically provide a lower yield to maturity than investment-grade bonds.
• E) A debenture is a secured bond that is backed by some or all of the firm's fixed assets.

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Definitions:

Discount Rate

The discount rate is the interest rate charged to commercial banks and other financial institutions for loans received from the Federal Reserve's discount window.

Prime Rate

The interest rate that commercial banks charge their most credit-worthy customers, frequently used as a benchmark in lending rates.

Commercial Banks

Financial institutions that accept deposits, offer various loans, and provide other financial services to the public.

Open Market Operations

Central bank activities involving the buying or selling of government securities to control the money supply and interest rates.