A company issues bonds saying that it will use the proceeds for a safe investment. Instead, it uses the proceeds for a risky investment. Which of the following statements is true about this situation.

a. This will result in a decrease in the value of the debt because the company is riskier.

b. This will result in a decrease in the value of the equity because the company is riskier.

c. This will cause bondholders to convert their bonds to stock.

d. Dividends will go up to compensate shareholders for their increased risk.

e. This will result in a lawsuit from the stockholders because it is bait and switch.

Which one of the following statements is TRUE?

a. A shareholder-friendly charter will make it easier for a company to be acquired.

b. A shareholder-friendly charter will make it easier for shareholders to meet with the CEO if they have concerns.

c. An example of an agency cost is when the board of directors pays a dividend to shareholders.

d. A targeted share repurchase can be used to encourage a hostile takeover.

e. A company whose board members are elected in staggered terms is said to be an interlocking board of directors.

Which one of the following statements is TRUE?

a. An example of an agency cost is the salary of the agent hired to work for the principal.

b. Creditors have a claim on a firm's earning stream through the dividend payments they receive.

c. The commission required by the Federal Housing Agency for a small business loan is an example of an agency cost.

d. An example of an agency cost is when an attorney hires an expert witness for a trial.

e. An example of asset switching is when a company borrows for a new manufacturing facility but then uses it to repurchase its own stock.