If the Possibility of a Default Increases Because Corporations Begin

question 57

Multiple Choice

If the possibility of a default increases because corporations begin to suffer losses,then the default risk on corporate bonds will ________,and the bonds' returns will become ________ uncertain,meaning that the expected return on these bonds will decrease,everything else held constant.

• A)increase;less
• B)increase;more
• C)decrease;less
• D)decrease;more

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Definitions:

Patent Account

An account on the balance sheet that represents the cost of purchasing patents or the expenses incurred in securing patents.

Successful Product

A product that achieves significant sales, profitability, and/or market share goals.

Recognized

The formal acknowledgement in accounting when an item is recorded and reflected in the financial statements.

Goodwill

Represents the excess value paid for a company over its fair market value, often related to intangible assets like brand reputation or customer relationships.