Which of the Following Statements Is Correct

question 99

Multiple Choice

Which of the following statements is correct?

• A)All else being equal, secured debt is more risky than unsecured debt.
• B)The expected return on a corporate bond must be more than its promised return if the probability of default is greater than zero.
• C)All else being equal, senior debt has more default risk than subordinated debt.
• D)A company's bond rating is affected by its financial ratios and provisions in its indenture.

---

Definitions:

Variable Input

An input used in production that can be adjusted in the short term, such as labor or raw materials.

Short Run

A period in which at least one input or resource is fixed, limiting the capacity to adjust all factors of production.

Increasing Returns

The situation in which output increases by a larger proportion than the increase in inputs used in production.

Workers

Individuals who perform tasks or work for compensation, typically within the structure of employment by organizations or companies.