Reference no: EM131867967

1. Common stock is generally considered to be a more risky asset class than corporate bonds because:

A. If a firm goes bankrupt, then common stockholders are personally liable for firm's obligations.

B. interest payments on corporate bonds are indexed for inflation, while dividends on common stock are not indexed for inflation.

C. Corporate bond prices vary directly with interest rate while common stock prices vary inversly with interest rates.

D. If a firms goes bankrupt, then bondholders' claims are paid before those stockholders

2. A firm in financial distress that reorganizes through the bankruptcy process:

a) must abide by the Section 363 provisions of Chapter 11.

b) must file a reorganization plan within 90 days of filing the bankruptcy petition.

c) must only have the reorganization plan approved by its primary creditor.

d) will continue to operate as a going concern throughout the entire process.

e) cannot issue new securities to either creditors or shareholders.