When the Bank of Canada's Actions Cause Interest Rates on Newly

question 243

Multiple Choice

When the Bank of Canada's actions cause interest rates on newly issued bonds to decrease from 6% to 5%,the prices of existing bonds

• A) increase.
• B) decrease.
• C) remain unchanged.
• D) decrease only if the coupon rate is less than 5%.
• E) increase only if the coupon rate is greater than 6%.

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Definitions:

Hostile Takeovers

Hostile takeovers occur when one company tries to acquire another without the consent or cooperation of the target company's management or board.

Targeted Share Repurchases

Also known as greenmail, occurs when a company selectively buys back stock from a potential acquirer at a price that is higher than the market price. In return, the potential acquirer agrees not to attempt to take over the company.

Cumulative Voting

A voting system used in elections, where shareholders multiply the number of shares they own by the number of director positions available to get their total number of votes.

Corporate Governance

The set of rules that controls a company's behaviour toward its directors, managers, employees, shareholders, creditors, customers, competitors, and community.