Potential Buyers of ABC Corporation Bonds Are Not Concerned About

question 278

Multiple Choice

Potential buyers of ABC Corporation bonds are not concerned about ABC Corporation declaring bankruptcy. Potential buyers of XYZ Corporation bonds are concerned that XYZ Corporation may declare bankruptcy. Which of the following statements is correct?

• A)Other things equal, the interest rate on XYZ Corporation bonds will be high relative to the interest rate on ABC Corporation bonds.
• B)An ABC Corporation bond is a perpetuity, whereas an XYZ Corporation bond is not a perpetuity.
• C)XYZ Corporation bonds carry more interest-rate risk than do ABC Corporation bonds.
• D)All of the above are correct.

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Definitions:

Photosynthetic

The process by which green plants, algae, and some bacteria convert light energy into chemical energy in the form of glucose, using carbon dioxide and releasing oxygen.

Guard Cells

Specialized cells in the epidermis of leaves and stems that regulate the opening and closing of stomata, controlling gas exchange and water loss.

Epidermal Cells

Cells making up the epidermis, the outermost layer of the skin, serving as the body’s protective barrier against environmental stressors, pathogens, and water loss.

Transpiration

The loss of water vapor from the aerial surfaces of a plant (i.e., leaves and stems).