Which of the following statements is CORRECT?
A. Other things held constant, a callable bond should have a lower yield to maturity than a noncallable bond.
B. Once a firm declares bankruptcy, it must then be liquidated by the trustee, who uses the proceeds to pay bondholders, unpaid wages, taxes, and lawyer fees.
C. Income bonds must pay interest only if the company earns the interest. Thus, these securities cannot bankrupt a company prior to their maturity, and this makes them safer to the issuing corporation than "regular" bonds.
D. A firm with a sinking fund that gave it the choice of calling the required bonds at par or buying the bonds in the open market would generally choose the open market purchase if the coupon rate exceeded the going interest rate.
E. One disadvantage of zero coupon bonds is that the issuing firm cannot realize any tax savings from the debt until the bonds mature.
Answer: C
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A common problem of team writing is
A) sloppy format. B) lack of organization. C) multiple voices. D) lack of detail. E) excessive informality.
Arthur negligently stopped his car on the highway. Betty, who was driving along, saw Arthur's car in sufficient time to attempt to stop. However, Betty negligently put her foot on the accelerator instead of the brake and ran into Arthur's car. If Arthur sues Betty for damages:
A) Arthur's contributory negligence will prevent his recovery from Betty in all jurisdictions. B) Betty had the last clear chance to avoid the accident and will bear full legal responsibility for it. C) Arthur has assumed the risk of the accident. D) because both parties were negligent, in a state that follows the modified comparative negligence doctrine, both parties will share the liability for their injuries in proportion to their degree of fault unless the court finds Arthur's contributory negligence was as great as or greater than Betty's negligence.
Explain the difference among integrity, independence, and objectivity.
What will be an ideal response?
Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a lower beta than portfolio B. According to the Treynor measure, the performance of portfolio A
A. is better than the performance of portfolio B. B. is the same as the performance of portfolio B. C. is poorer than the performance of portfolio B. D. cannot be measured as there are no data on the alpha of the portfolio. E. None of the options are correct.