HT Fox Corp has outstanding $20-$year bonds with a yield to maturity of $8\%.$ The yield to

maturity on $20-$year treasury bonds is currently $3\%.$ Horton T$.$ Fox, CEO, has noticed that

his company's bonds have yields that are approximately $5\%$ higher than treasuries. The

current market conditions confirm his opinion. Suppose an event occurs that leads investors

to believe that investment conditions have become much riskier. One would expect which of

the following?

A$)$ The yields on Fox's bonds and on $20-$year treasuries will both increase

B$)$ The yield on Fox's bonds will decrease and the yield on $20-$year treasuries will

increase

C$)$ The corporate yield spread between Fox's bonds and treasuries will decrease

D$)$ The corporate yield spread between Fox's bonds and treasuries will increase

E$)$ Both $($b$)$ and $($d$)$ are true

Delaware Delicacies has Net Income of $$50M$ for the past year. Their return on equity is

$20\%.$ Consistent with the company's policy, the company has decided to pay $$20M$ as

dividends and retain $$30M$ in the company. Which of the following statements is true?

A$)$ The $$30M$ is added to retained earnings and increases the book value of the

company's equity

B$)$ The company has a sustainable growth rate of $12\%$

C$)$ The company's payout ratio is $60\%$

D$)$ All of the above are true

E$)$ Only $($a$)$ and $($b$)$ above are true