QUESTION 30: Which of the following would be categorized as a financial distress cost?
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higher interest rates charged by lenders |
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lower bond prices for bonds of the same risk as before the distress |
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attorney fees for bankruptcy |
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all of these |
all of these
because all these will add costs to the company while under financial pressure
QUESTION 30: Which of the following would be categorized as a financial distress cost? higher interest...
Which of the following items will NOT change due to the cost of financial distress? Cost of legal fees Cost of goods sold Cost of equity Cost of debt
Question 21 2.5 pts Which of the following statements is false? corporations, unlike proprietorships and partnerships, are subject to double taxation. bond prices will fall when lenders expect higher rates inflation in the future. the stock and bond markets are very efficient. In real life, when an individual expects the economy to expand, he should hold no nominal assets. Question 22 2.5 pts Which of the following statements is true? The relationship between risk and potential reward is inverse. Bond...
Which of the following statement is not true about interest rate risk? (Only one correct answer.) Select one: a. Long term bonds have higher interest rate risk than short term bonds. ob. Interest rate risk is the uncertainty of how the bond price will change following the interest rate changes. c. Lower coupon bonds have lower interest rate risk. d. Bond prices are negatively related to interest rate movements.
The Fed controls interest rates to either tighten or loosen the economy. When the Feds are needing to tighten the economy, they will raise the interest rates. When interest rates are changed, it sends a ripple effect through the entire financial market. When interest rates rise, cost of capital and borrowing increase. Consumers will borrow and spend less. This will lead to a slower economy and help to hedge inflation. However, the change in interest rates can affect the market...
Which one of the following is true? Interest Rate Risk is the risk that arises for bond owners from fluctuating interest rates. All other things being equal, the higher the coupon rate, the greater the interest rate risk. Interest Rate Risk is the risk that arises for bond owners from fluctuating interest rates. All other things being equal, the shorter the time to maturity, the lower the interest rate risk. O When comparing a 20-year bond versus a 1-year bond,...
The prices of low-coupon bonds tend to be less sensitive to a given change in interest rates than high coupon bonds, other things held constant. O O True False There is an inverse relationship between bonds' quality ratings and their required rates of return. Thus, the required return is lowest for AAA-rated bonds, and required returns increase as the bond ratings get lower. O True or False What's TRUE regarding long-term and short-term bonds (assume they have the same par...
6) Which of the following statements about bonds is true? A) If market interest rates are above a bond's coupon interest rate, then the bond will sell below its par value. B) As the maturity date of a bond approaches, the market value of a bond will become more volatile. C) Bond prices move in the same direction as market interest rates. D) Long-term bonds have less interest rate risk than do short-term bonds.
Which of the following statements is CORRECT? a. The market price of a bond will always approach its par value as its maturity date approaches, provided the bond’s required return remains constant. b. If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices. c. The total yield on a bond is derived from dividends plus changes in the price of the bond. d. Bonds are generally regarded...
Which of the following bonds will have higher price sensitivity to interest rate (i.e. higher interest rate risk)? 5 years to maturity, 10% coupon bonds 30 years to maturity, 10% coupon bonds 30 years to maturity, 3% coupon bonds 5 years to maturity, 3% coupon bonds
27) Which of the following would shift up the aggregate demand (AD) curve? A) higher interest rates B) lower government expenditures C) lower tax rates D) higher exchange rate (higher value of US dollar) E) an increase in the price level