Assuming Market Efficiency,which One of These Is the Least Sensible

question 47

Multiple Choice

Assuming market efficiency,which one of these is the least sensible explanation of why convertibles and warrants are issued?

• A)Cash flows from these securities best match the cash flows of the firm.
• B)The firm is relatively large with a low level of financial leverage.
• C)The securities are useful when it is costly to assess the risk of the issuing firm.
• D)The securities may resolve agency problems associated with raising money.
• E)The issuer has a low bond rating.

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Definitions:

Inflation

The quickness in the rise of aggregate prices for goods and services, impacting negatively on how much can be bought.

Minimum Wage

The lowest legally permissible wage that employers can pay to workers, set by governmental laws or regulations.

Output

The total amount of goods or services produced by a firm, industry, or economy within a specified time period, reflecting the level of production activity.

Unemployment

The situation in which individuals who are capable of working and willing to work cannot find employment.