Credit Risk Implies That the Promised Yield to Maturity on the Bond

question 48

True/False

Credit risk implies that the promised yield to maturity on the bond is higher than the expected yield.

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Definitions:

Dilutive

Referring to a financial action or arrangement, such as the issuance of new shares, that decreases an existing shareholder's percentage of ownership.

Antidilutive

Refers to financial transactions or securities that, if exercised or converted into common stock, would increase earnings per share.

Treasury Stock Method

An accounting method used to calculate the number of shares outstanding when considering stock options and warrants, assuming these are exercised and the treasury stock is sold.

Convertible Bond

A type of bond that can be converted into a predetermined amount of the issuing company's equity at certain times during its life, usually at the discretion of the bondholder.