Which of the Following Statements Is CORRECT

question 48

Multiple Choice

Which of the following statements is CORRECT?

• A) Subordinated debt has less default risk than senior debt.
• B) Convertible bonds have lower coupon rates than non-convertible bonds of similar default risk because they offer the possibility of capital gains.
• C) Junk bonds typically provide a lower yield to maturity than investment-grade bonds.
• D) A debenture is a secured bond that is backed by some or all of the firm's fixed assets.
• E) Junior debt is debt that has been more recently issued, and in bankruptcy it is paid off after senior debt because the senior debt was issued first.

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Definitions:

Forward Exchange Rate

The agreed-on exchange rate to be used in a forward trade.

Premium

The amount paid for a contract or policy over and above its nominal value or for a product above its market price due to special features or quality.

Direct Exchange Rate

The amount of domestic currency needed to purchase one unit of a foreign currency.

Canadian Dollar

The currency of Canada, represented by the symbol CAD and often referred to as the "loonie" due to the loon depicted on the one-dollar coin.