Which One of the Following Alternatives Is Commonly Used to Reduce

question 19

Multiple Choice

Which one of the following alternatives is commonly used to reduce agency problems as they relate to corporate control?

• A) stock options
• B) higher salaries
• C) larger perquisites ("perks")
• D) less restrictive accountability requirements

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Definitions:

Unsecured Debt

A type of debt that is not backed by collateral, making it riskier for lenders and often resulting in higher interest rates for borrowers.

Reinvestment Rate Risk

The risk that the yield from reinvesting cash flows will be lower than the initial investment's yield, typical in fixed-income securities.

Zero Coupon Bonds

Bonds that do not pay periodic interest payments and are instead sold at a discount from their face value and redeemed at maturity for the full face value.

Coupon Payments

Periodic interest payments made to bondholders, usually on an annual or semi-annual basis, as compensation for investing in the bond.