Digby Drilling Ltd. (DDL) has hired an investment banker to advise it about a forthcoming convertible bond issue. After surveying institutions the advisor had informed DDL that it can sell $1,000,000 worth of convertible bonds at 10% interest and the same amount of non-convertible bonds at 12% interest. Which of the following lesson about stock market efficiency does this information illustrate?
A) Timing DDL financing doesn't matter.
B) DD is an undervalued business.
C) DDL cannot fool the market.
D) DDL does not decide the level of risk.
E) DDL is championing shareholder interests.
Correct Answer:
Verified
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