If an Investor Wanted to Reduce the Risk of a Levered

question 97

Multiple Choice

If an investor wanted to reduce the risk of a levered stock in their portfolio,how could they go about doing so while still retaining shares in the company?

• A)They could sell some of their shares and use the proceeds to buy the firm's bonds.
• B)They could sell some of their bonds and use the proceeds to buy the firm's stock.
• C)They could use borrowed funds to buy more of the firm's stock.
• D)None of these.

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Definitions:

Mixed/Whole Numbers

Numbers consisting of an integer and a fractional part, typically represented as a whole number and a proper fraction.

Percents

A mathematical representation of a fraction of 100, used to describe proportions or rates.

Decimals

Numbers expressed using a decimal system, involving a point to separate the whole number from the fractional part.

Mixed/Whole Numbers

Numbers that consist of both an integer and a fraction part.