etween equity and debt capital a. Debt is safer than equity b. Equity is riskier than debt c. Both debt and equity are equally risky d. No option is correct
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Between equity and debt capital
Debt is safer than equity
Equity is riskier than debt
Both debt and equity are equally risky
No option is correct
Step by step
Solved in 2 steps
- Between equity and debt capital a.Both debt and equity are equally risky b.Equity is riskier than debt c.No option is correct d.Debt is safer than equityDebt will always have a cost basis that is less than equity. OA. True B. FalseIt is more provident that equity financing is more favored because of the ultimate risks associated within the cost of accumulating debt in terms of paying principal plus interest. Group of answer choices True False
- Which of the following risks cannot be hedged?A. CreditB. LiquidityC. CurrencyD. DurationA. Briefly explain the problem of moral hazard in: (i) Equity financing (ii) Debt financingB. What is the adverse selection problem in financial markets and how can it be solved?1. How are passive investments accounted for under ASPE? a) Cost of amortized cost. b) FVTPL for equity securities with fair value prices c) Neither is correct. d) Both treatments are acceptable.
- The issuance costs of new debt securities can be ignored since those costs will not be reflected in the yield to maturity of the debt in the future. Select one: a. False b. TrueMarket risk ________. a. is equal to the rate of return generated by a risk-free asset b. cannot be eliminated, as it is non-diversifiable c. is synonymous with diversifiable risk d. is synonymous with financial riskCounterparty credit risk is a function of the probability of default, exposure at default, and loss given default. Assuming that the individual exposure at default with a counterparty is fixed, which of the following statements is correct? A. The probability of default can be mitigated by collateral, and exposure at default can be mitigated by netting. B. The probability of default can be mitigated by netting, and exposure at default can be mitigated by collateral. C. Loss given default can be mitigated by collateral, and exposure at default can be mitigated by netting. D. Loss given default can be mitigated by netting, and exposure at default can be mitigated by collateral.
- The line between debt and equity is hard to draw. What does this means?Stability deals with the relationship between debt and equity. Question 18 options: 1) True 2) FalseStraight debt and equity have very different payoff structures. Debt holders get paid "first", but only up to the amount they are owed. Equity holders get paid "last", but essentially get all the upside after the debtholders' obligation has been satisfied. Group of answer choices True False