Which of the Following Statements Is CORRECT

question 25

Multiple Choice

Which of the following statements is CORRECT?

• A) Other things held constant, a callable bond should have a lower yield to maturity than a noncallable bond.
• B) Once a firm declares bankruptcy, it must then be liquidated by the trustee, who uses the proceeds to pay bondholders, unpaid wages, taxes, and lawyer fees.
• C) Income bonds must pay interest only if the company earns the interest.Thus, these securities cannot bankrupt a company prior to their maturity, and this makes them safer to the issuing corporation than "regular" bonds.
• D) A firm with a sinking fund that gave it the choice of calling the required bonds at par or buying the bonds in the open market would generally choose the open market purchase if the coupon rate exceeded the going interest rate.
• E) One disadvantage of zero coupon bonds is that the issuing firm cannot realize any tax savings from the debt until the bonds mature.

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Definitions:

Plant Location

The geographical site chosen for situating industrial operations or manufacturing facilities, based on criteria like cost, resources, and logistics.

Modern Production Facilities

Industrial or manufacturing plants that utilize the latest technology, equipment, and processes to increase efficiency, productivity, and quality of products.

CAD

Computer-Aided Design, technology used by engineers, architects, and designers to create precision drawings or technical illustrations.

CAM

Computer-Aided Manufacturing, a technology that uses computer software and machinery to automate the manufacturing process, improving efficiency and precision.