Which of the Following Statements Is True

question 14

Multiple Choice

Which of the following statements is true?

• A)Companies can have high growth, yet negative stock returns.
• B)A major safeguard against management's undertaking a project that is not in shareholders' best interest is the need to raise capital to fund the project.
• C)The older the firm, the more well-structured it is, and corporate control is better than it is for a newly established firm.
• D)Giving stock options to management eliminates agency conflicts.

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Definitions:

Securitized Assets

Financial securities that are created by pooling various types of contractual debt such as mortgages, and selling them to investors.

Convertibles

Refers to convertible bonds or preferred stocks that can be converted into a predetermined amount of the company's equity at certain times during their life, usually at the discretion of the bondholder.

Warrants

Financial instruments that give the holder the right, but not the obligation, to buy a company's stock at a specific price before a certain date.

Conversion Price

The predetermined price at which convertible securities, like bonds or preferred stocks, can be exchanged for a specified amount of another form, typically common stock.