The Presence of a Large Amount of Debt Can Encourage

question 9

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

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Definitions:

Government Regulation

Laws, rules, or directives enacted by governments to control or manage specific activities, industries, or behaviors within their jurisdiction for the public good.

Liberal Leanings

A tendency or preference towards policies and beliefs that emphasize social equality, individual rights, and the protection of civil liberties.

Conservative Leanings

A political ideology favoring the maintenance of traditional institutions, skepticism towards change, and a preference for a gradual development over radical changes.

Campaign Blogs

Online journals or websites where candidates, political parties, or interest groups post updates, opinions, and other content related to a political campaign.