A company issues bonds saying that it will use the proceeds for a safe investment. Instead, it uses the proceeds for a risky investment. Which of the following statements is true about this situation.
A. This will result in a decrease in the value of the debt because the company is riskier.
B. This will result in a decrease in the value of the equity because the company is riskier.
C. This will result in a lawsuit from the stockholders because it is bait and switch.
D. This will cause bondholders to convert their bonds to stock.
E. Dividends will go up to compensate shareholders for their increased risk.
Answer: A
You might also like to view...
In a sale or return contract, goods are delivered to buyers primarily for:
A. security. B. resale. C. trial. D. personal use.
Adjusting entries affect only expense and asset accounts
Indicate whether the statement is true or false
Which sentence is punctuated correctly?
A) Customer service must be a priority of all employees ignoring our customer needs will surely put us out of business. B) Customer service must be a priority of all employees, ignoring our customer needs will surely put us out of business. C) Customer service must be a priority of all employees; ignoring our customer needs will surely put us out of business.
If a store runs out of sale items, consumers must be given rain checks
Indicate whether the statement is true or false