Lawrence Jones is the president of the Jones Water Filter Company. As president, he is in control of the issuance of stocks and bonds. Three years ago when the company needed cash, Lawrence purchased from the company a $100,000, 4 percent, 10-year unsecured bond. The interest rate has begun to increase. Lawrence suggests that the company refinance the bonds to

Chapter 22, Exerise Questions #35

Lawrence Jones is the president of the Jones Water Filter Company. As president, he is in control of the issuance of stocks and bonds. Three years ago when the company needed cash, Lawrence purchased from the company a $100,000, 4 percent, 10-year unsecured bond. The interest rate has begun to increase. Lawrence suggests that the company refinance the bonds to extend the life of the bonds, even though the interest rate has increased to 7 percent. Is this a conflict of interest? Why or why not?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...