Which of the Following Statements Is CORRECT

question 76

Multiple Choice

Which of the following statements is CORRECT?

• A)Junior debt is debt that has been more recently issued, and in bankruptcy it is paid off after senior debt because the senior debt was issued first.
• B)Subordinated debt has less default risk than senior debt.
• C)Convertible bonds 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.

---

Definitions:

Returns to Scale

The change in output resulting from a proportional change in all inputs, where increases can be constant, increasing, or decreasing.

Long-Run Average Cost

The average cost per unit of output where all inputs, including capital, are variable in the long term.

Marginal Cost

The costs entailed in generating an extra unit of a product or service.

Economies of Scale

The reduction in per-unit production costs resulting from an increase in the scale of production.