All of the Following Are True About Debt Securities Except

question 61

Multiple Choice

All of the following are true about debt securities except:

• A) They can have a cost higher than the maturity value.
• B) They can be short-term investments.
• C) They can be long-term investments.
• D) They can have a cost lower than the maturity value.
• E) They reflect an owner relationship.

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Definitions:

Information Gathering

The process of collecting data or information for specific purposes, often used in decision-making.

Principal-agent Relationships

Describes a situation where one party (the principal) hires another (the agent) to perform a task on their behalf, involving issues of trust and responsibility.

Adverse Selection

A situation in financial markets where buyers and sellers have different information, leading to transactions that favor the party with more information, often seen in insurance markets.

Moral Hazard

The risk that one party to a contract can change their behavior to the detriment of another after the contract has been concluded, particularly where one party bears the cost of those actions.