Which of the Following Statements Is Most Correct

question 20

Multiple Choice

Which of the following statements is most correct?

• A) A firm with a sinking fund payment coming due would generally choose to buy back bonds in the open market, if the price of the bond exceeds the sinking fund call price.
• B) Income bonds pay interest only when the amount of the interest is actually earned by the company. Thus, these securities cannot bankrupt a company and this makes them safer to investors than regular bonds.
• C) One disadvantage of zero coupon bonds is that issuing firms cannot realize the tax savings from issuing debt until the bonds mature.
• D) Other things held constant, callable bonds should have a lower yield to maturity than noncallable bonds.
• E) All of the above statements are false.

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Definitions:

Consideration

The benefit which must be bargained for between the parties and is the essential reason for a party entering into a contract.

Exchange Of Money

The act of giving one form of currency in return for another, which can occur in financial transactions, currency exchange, or the purchase of goods and services.

Acceptance

The act of agreeing to a proposal or offer, thereby creating a binding contract upon meeting the terms of the offer.

Seller's Offer

A proposal by a seller to sell goods or services under specified terms and conditions to a buyer.