The value of a convertible bond is relatively insensitive to changes in the riskiness of the firm, because the value of the underlying bond is inversely related to changes in the firm's risk, while the value of the implicit call option is directly
related to changes in the firm's risk. Consequently, with a convertible bond the firm's management no longer has an incentive to engage in to expropriate value from the bondholders, and therefore one of the major agency problems associated with debt is resolved.
a. excessive consumption of perquisites.
b. risk shifting.
c. excessive dividend payments.
d. excessively conservative investment policies.
B
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The method of land description that includes principal meridians and base lines is called.
A. Lot and block system B. Metes-and-bounds description C. Rectangular (government) survey system D. A geological survey
Use the expected value criterion to select the best alternative. Assume that the probability of S2 is equal to 0.4
What will be an ideal response?