If a Corporation Offers Greater Protection to a Given Class

question 116

True/False

If a corporation offers greater protection to a given class of bondholders, it must raise the interest rate on its bonds to make them more attractive to investors.
In keeping with risk/return, greater protection lowers risk, therefore investors cannot expect as great a return as if that protection were absent.

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Definitions:

Litigation

The process of taking legal action in court to enforce or defend a right or claim.

First Amendment

A part of the United States Constitution which protects freedoms concerning religion, expression, assembly, and the right to petition.

FTC Commissioners

Officials appointed to the Federal Trade Commission (FTC), a U.S. federal agency, responsible for enforcing antitrust and consumer protection laws.

Staggered Terms

A system used in boards and committees where members are elected for different lengths of time, so not all members are replaced at once.