Principal payments as scheduled is called default risk

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Reference no: EM132062954

1. Risk aversion is the behavior exhibited by managers who require ________.

A. an increase in return, for a given increase in risk

B. decrease in return, for a given increase in risk

C. an increase in return, for a given decrease in risk

D. no changes in return, for a given increase in risk

2. ________ is the process of evaluating and selecting long?term investments that are consistent with a firm's goal of maximizing owners' wealth.

A. Capital budgeting

B. Recapitalizing assets

C. Ratio analysis

D. Securitization

3. The possibility that the issuer of a bond will not pay the contractual interest or principal payments as scheduled is called default risk.

True

False

4. The claims of the equity holders on a firm's assets have priority over the claims of creditors because the equity holders are the owners of the firm.

True

False

5. A yield curve that reflects relatively similar borrowing costs for both short-term and long?term loans is called a normal yield curve.

True

False

Reference no: EM132062954

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