Which of the Following Statements Is False

question 11

Multiple Choice

Which of the following statements is false?

• A) The bond's expected return, which is equal to the firm's debt cost of capital, is less than the yield to maturity if there is a risk of default.
• B) The two best-known bond-rating companies are Standard & Poor's and Dow Jones.
• C) Bonds in the bottom five categories are often call speculative bonds, junk bonds, or high-yield bonds.
• D) Bond ratings encourage widespread investor participation and relatively liquid markets.

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Definitions:

Common Stock

Type of equity ownership in a corporation, entitling holders to vote at shareholder meetings and to receive dividends.

Taxable Income

The amount of income that is used to calculate an individual's or a company’s income tax due, after exemptions and deductions.

Operating Income

Earnings before interest and taxes (EBIT), representing a company's profit from regular operations, excluding non-operational income and expenses.

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to shareholders.