The Presence of a Large Amount of Debt Can Encourage

question 92

Multiple Choice

The presence of a large amount of debt can encourage shareholders to take excessive risk because

• A)equity holders are risk seeking by nature.
• B)firm value increases with risk taking.
• C)the costs of failure are borne largely by debt holders.
• D)debt holders are risk seeking.

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Definitions:

Gerontology

The scientific study of old age and aging.

Ontology

The philosophical study of the nature of being, existence, or reality, as well as the basic categories of being and their relations.

Morphology

The study of the form and structure of words and their parts in a language.

Life Course

The sequence of significant events, experiences, and transitions in an individual's life from birth to death.