A Decrease in Default Risk on Corporate Bonds ________ the Demand

question 21

Multiple Choice

A decrease in default risk on corporate bonds ________ the demand for these bonds,and ________ the demand for default-free bonds,everything else held constant.

• A)increases;lowers
• B)lowers;increases
• C)does not change;greatly increases
• D)moderately lowers;does not change

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Definitions:

Ultramares Rule

A legal principle that limits the liability of accountants for negligence to parties with whom they are in direct contractual relationship unless fraud is involved.

Duty of Care

A legal obligation requiring individuals and entities to exercise a reasonable standard of care to avoid causing harm to others.

Positive Net Worth

The financial status where total assets exceed total liabilities.

Obvious Theft

A situation where an act of stealing is clear and unmistakable to any observer.