Which One of the Following Statements Concerning Debt Is Correct

question 342

Multiple Choice

Which one of the following statements concerning debt is correct?

• A) The vast majority of bonds issued are sold in the public markets.
• B) Bond issues avoid the registration required on equity issues.
• C) Interest rates on private placements tend to be higher than those on similar public issues.
• D) A prospectus is required for a new equity issue, but not for a bond issue.
• E) Private placement debt tends to be less flexible than public debt.

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Definitions:

Available-for-Sale

Available-for-sale refers to financial assets that are not classified as held-for-trading or held-to-maturity, and are recorded at fair value with changes recognized in other comprehensive income.

Market Values

The current price at which an asset or service can be bought or sold in a competitive marketplace.

Unrealized Increase/Decrease

Refers to the change in value of an investment that has not been sold, affecting the company’s balance sheet but not its income statement.

Trading Securities

Financial instruments that are purchased by a company not for long-term investment but rather with the intention to trade in the short term for profit.