High-Risk, High-Yield Bonds Used to Finance Mergers, Leveraged Buyouts, and Troubled

question 117

Multiple Choice

High-risk, high-yield bonds used to finance mergers, leveraged buyouts, and troubled companies are referred to as:

• A) callable bonds.
• B) junk bonds.
• C) convertible bonds.
• D) floating-rate bonds.
• E) putable bonds.

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Definitions:

Stockholder Basis

The total amount invested in a company by shareholders, including the purchase price of shares, which is used to determine capital gains or losses for tax purposes.

Capital

Financial assets or resources that businesses or individuals use to fund operations, investments, and growth.

Ordinary Business Income

Income earned from the normal business operations, subject to regular tax rates.

Subchapter S

A section of the Internal Revenue Code that allows corporations to pass income directly to shareholders and avoid double taxation while retaining the benefits of corporate structure.