The Total Direct Costs of a Debt Issue, When Expressed

question 48

Multiple Choice

The total direct costs of a debt issue, when expressed as a percentage of gross proceeds, tends to:

• A)increase as the quality of the debt increases.
• B)decrease as the size of the issue decreases.
• C)decrease when the bonds are convertible rather than straight.
• D)decrease as the proceeds of the bond issue increase.
• E)be relatively the same regardless of the type or quality of the debt issue.

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Definitions:

Sole Proprietorship

A firm with a single owner who has the right to all profits but who also bears unlimited liability for the firm’s losses and debts.

Personal Liability

An individual's legal responsibility to settle a debt or fulfill an obligation from their own assets, as opposed to the liabilities being limited to business assets.

Business Organization

A legal entity formed to conduct business activities, ranging from sole proprietorships to corporations, structured according to law and operational needs.

Household Income

The combined gross income of all members of a household, encompassing wages, salaries, benefits, and other income sources before taxes.