An Often Overlooked Benefit of Debt Instruments Issued by Firms

question 33

Multiple Choice

An often overlooked benefit of debt instruments issued by firms in emerging markets is that:

• A)there is an active secondary market for the instruments,making them very liquid.
• B)a country risk premium is often built into the yield on the debt instrument,increasing the yield above the yield available on other investments.
• C)currency risk is not a consideration since the debt instruments are denominated in USD.
• D)political risks are usually minimized by government guarantees of the instruments.

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Definitions:

Financial Accounting

The field of accounting focused on the preparation of financial statements for external users, such as investors, creditors, and regulatory agencies.

Economic Events

Economic events are transactions or occurrences that affect the financial position of an entity and can be reliably measured.

Period Cost

Expenses that are not directly tied to the production process and are instead accounted for in the period they occur.

Product Cost

The total of costs directly assigned to the production of goods sold by a company, including materials, labor, and overhead.