Which of the Following Statements Is False

question 81

Multiple Choice

Which of the following statements is false?

• A) Investors pay less for bonds with credit risk than they would for an otherwise identical default-free bond.
• B) Credit spreads fluctuate as perceptions regarding the probability of default change.
• C) Credit spreads are higher for bonds with higher ratings.
• D) We refer to the difference between the yields of the corporate bonds and the treasury yields as the default spread or credit spread.

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Definitions:

Separate Legal Entity

A status that allows a company to operate as its own legal entity, distinct from its shareholders, with rights to sue, be sued, own assets, and incur liabilities.

Taxable Entity

A taxable entity refers to any individual, business, or organization that is subject to tax by governments.

Business Organization

The structure by which a business is organized and operated, which can range from sole proprietorships to corporations.

Going-Concern Principle

The assumption that a company will continue to operate in the foreseeable future, not planning to liquidate or cease operations.