What Is the Most Common Purpose for Which Junk Bonds

question 23

Multiple Choice

What is the most common purpose for which junk bonds are used?

• A) To finance hostile takeovers.
• B) By investors who require an instrument that falls between debt and common shares in terms of risk and return.
• C) To finance reverse take-overs, where a smaller business is acquiring a larger one.
• D) By investors who require a high return option for portfolio diversification.
• E) To finance a business whose credit is below an investment grade rating.

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Definitions:

Insanity Defense

A legal defense strategy in which the defendant claims that they were unable to understand the nature of their actions or distinguish right from wrong due to a psychiatric disorder at the time of the crime.

Biological Perspective

An approach in psychology that examines behavioral and mental processes through the lens of biological processes and structures.

Behavioral

Relating to actions or activities of individuals or groups and the study of these actions in psychology, especially concerning the effects on the environment on behavior.

Social

Pertaining to the relations between individuals or groups of people, including interactions and organizational patterns within society.