Altman Reports the Default Rate on Junk Bonds for the 1980's

question 49

Multiple Choice

Altman reports the default rate on junk bonds for the 1980's were less than 4% until 1989 but in 1990 and 1991:

• A) declined dramatically to 1.1% and 1.3% respectively and stayed at these levels throughout the 1990's.
• B) rose dramatically to over 10% before falling to under 2% for 1993 to 1997.
• C) stayed about the same because there were no new offerings.
• D) the market closed as no firms have been able to fill Drexel Burnham's role.

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Definitions:

Pure Competition

A market structure characterized by a large number of small firms, a homogeneous product, and easy entry and exit from the market.

Long Run

A period in which all factors of production and costs are variable, enabling full adjustment to change.

Short Run

A period in which at least one input in the production process is fixed, and only some inputs can be adjusted by firms.

Decreasing Costs

A situation where the total cost of production decreases as the volume of production increases.