Which of the Following Statements Is Correct

question 12

Multiple Choice

Which of the following statements is correct?

• A) Once a firm declares bankruptcy,it is liquidated by the trustee,who uses the proceeds to pay bondholders,unpaid wages,taxes,and lawyer fees.
• B) A firm with a sinking fund payment coming due would generally choose to buy back bonds in the open market,if the price of the bond exceeds the sinking fund call price.
• C) Income bonds pay interest only when the amount of the interest is actually earned by the company.Thus,these securities cannot bankrupt a company and this makes them riskier to investors than regular bonds.
• D) One disadvantage of zero-coupon bonds is that issuing firms cannot realize the tax savings from issuing debt until the bonds mature.
• E) Other things held constant,callable bonds should have a lower yield to maturity than noncallable bonds.

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Definitions:

Litigation

The process of taking legal action; involving the initiation, conduct, and resolution of lawsuits in the court system.

Special Certification

Recognition or validation that an individual or entity has met a specific set of standards or qualifications, usually in a professional context.

Legal Aid Office

A nonprofit organization that provides free legal services to individuals who cannot afford to hire a lawyer, typically in civil matters.

Needy

Individuals or groups requiring assistance due to poverty, deprivation, or significant need.