A "Subordinated Debenture

question 28

Multiple Choice

A "subordinated debenture"

• A) must be transferred with the bond to which it is attached.
• B) is used mainly by railroad companies and usually specifies equipment as collateral.
• C) entitles the bondholder to purchase shares of common stock at a specific price.
• D) is an unsecured bond with an inferior claim on assets in the event of liquidation.

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Definitions:

Firm's Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 means the stock is more volatile than the market, while a beta less than 1 means it is less volatile.

Single-Factor Market Model

A financial model that explains a security's returns as the outcome of a single market-wide factor and the security's sensitivity to that factor.

Unsystematic Risk

The risk associated with a specific company or industry that can be mitigated through diversification.

Residuals

Residuals are differences between observed and predicted values in statistical models, used to assess the fit of models to data.