Which of the Following Statements Is CORRECT

question 25

Multiple Choice

Which of the following statements is CORRECT?

• A) Other things held constant, a callable bond should have a lower yield to maturity than a noncallable bond.
• B) Once a firm declares bankruptcy, it must then be liquidated by the trustee, who uses the proceeds to pay bondholders, unpaid wages, taxes, and lawyer fees.
• C) Income bonds must pay interest only if the company earns the interest.Thus, these securities cannot bankrupt a company prior to their maturity, and this makes them safer to the issuing corporation than "regular" bonds.
• D) A firm with a sinking fund that gave it the choice of calling the required bonds at par or buying the bonds in the open market would generally choose the open market purchase if the coupon rate exceeded the going interest rate.
• E) One disadvantage of zero coupon bonds is that the issuing firm cannot realize any tax savings from the debt until the bonds mature.

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Definitions:

Follicular Cells

Follicular cells are cells surrounding each follicle in the thyroid gland, responsible for the synthesis and secretion of thyroid hormones.

Chromaffin Cells

Cells found in the adrenal medulla that produce adrenaline and noradrenaline, hormones involved in the body's stress response.

Adrenal Gland

A small gland located on top of each kidney, producing vital hormones such as adrenaline and steroids aldosterone and cortisol.

Follicular Cells

Thyroid gland cells arranged in spheres called follicles, which store thyroid hormone precursors and are crucial for thyroid hormone synthesis.