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 is an example of asset switching or bait and switch.
B. What the company does with the funds once it raises them isn't the business of the debtholders.
C. This will result in an increase in the value of the debt because the company is riskier.
D. All of the above.
E. None of the above.
Answer: A
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