Which of the Following Statements Is Correct

question 12

Multiple Choice

Which of the following statements is correct?

• A) Once a firm declares bankruptcy,it is liquidated by the trustee,who uses the proceeds to pay bondholders,unpaid wages,taxes,and lawyer fees.
• B) A firm with a sinking fund payment coming due would generally choose to buy back bonds in the open market,if the price of the bond exceeds the sinking fund call price.
• C) Income bonds pay interest only when the amount of the interest is actually earned by the company.Thus,these securities cannot bankrupt a company and this makes them riskier to investors than regular bonds.
• D) One disadvantage of zero-coupon bonds is that issuing firms cannot realize the tax savings from issuing debt until the bonds mature.
• E) Other things held constant,callable bonds should have a lower yield to maturity than noncallable bonds.

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Definitions:

Variance

A measurement of the spread between numbers in a dataset, indicating how much the values differ from the mean.

Standard Deviation

A measure of the amount of variability or dispersion of a set of values.

Shopping Outlet

A retail store or point of sale offering goods to the public, often characterized by the type of products it sells or its brand affiliation.

Probability of No Retries

The likelihood that a process or event will be completed successfully on the first attempt without the need for repeating it.