Which of the Following Statements Is FALSE

question 17

Multiple Choice

Which of the following statements is FALSE?

• A)Bond ratings encourage widespread investor participation and relatively liquid markets.
• B)Bonds in the top four categories are often referred to as investment grade bonds.
• C)A bond's rating depends on the risk of bankruptcy as well as the bondholder's ability to lay claim to the firm's assets in the event of a bankruptcy.
• D)Debt issues with a low-priority claim in bankruptcy will have a better rating than issues from the same company that have a higher priority in bankruptcy.

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Definitions:

Par Value

A nominal value assigned to shares of stock by the issuing company, which is the minimum price at which shares can be issued, often used for legal capital purposes.

Annual Dividend

The total dividend payment a company distributes to its shareholders in a fiscal year.

Cumulative Preferred Stock

Preferred stock where dividends accumulate if not paid in a given year and must be paid out before dividends can be distributed to common stockholders.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer.