Which of the Following Would Not Be a Sensible Explanation

question 6

Multiple Choice

Which of the following would not be a sensible explanation of why convertibles and warrants are issued if markets are efficient?

• A) Cash flow from these securities best match cash flow of the firm.
• B) If the firm does well, convertible bonds will turn out to have been the better alternative versus issuing common stock.
• C) The securities are useful when it is costly to assess the risk of the issuing firm.
• D) The securities may resolve agency problems associated with raising money.

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Definitions:

Weighting The Factors

The process of assigning importance or value to different criteria or variables when making decisions or assessments.

Distributed Points

A method used for allocating resources or rewards across different options or recipients based on predefined criteria or contributions.

Job Evaluation System

A systematic process for determining the relative worth or value of a job in an organization to establish fair compensation levels.

Point Method

A technique used in job evaluation that involves assigning point values to job elements to assess their relative worth.