Explain whether you agree or disagree with the following statement: "Because my bond is guaranteed by an insurance company, I have eliminated credit risk."
What will be an ideal response?
You would disagree with the statement because a bond's guarantee is only as good as the insurance company guaranteeing it. Thus, various forms of credit risk will still exist. For example, credit risk consists of default risk, credit spread risk, and downgrade risk. These risks are not necessarily eliminated if there is a financial guaranty by a nongovernment third-party entity such as a private insurance company. This is because insurance companies themselves can face financial difficulties. This fact was brought home to market participants at the end of 2007 when specialized insurance companies that provide financial guarantees faced financial difficulties and the downgrading of their own credit rating.
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The following transactions apply to a company that uses a periodic inventory system. For each transaction, state which accounts are used and whether the account is debited or credited. All transactions involve the purchase of inventory.
Donald Williams sells home gutter systems guaranteed to last for 20 years. After every sale, Williams asks his customers for the names of several friends who might be interested in learning about his gutter products. Williams is using the ________ method of prospecting.
A. cold canvass B. endless chain C. group D. observation E. center of influence
If investors are risk averse and hold only one stock, we can conclude that the required rate of return on a stock whose standard deviation is 0.21 will be greater than the required return on a stock whose standard deviation is 0.10. However, if stocks are held in portfolios, it is possible that the required return could be higher on the stock with the low standard deviation.
Answer the following statement true (T) or false (F)
The Census of Population is conducted every _____ years
a. 3 b. 5 c. 7 d. 10