A bond-warrant package
A)always increases the risk of the common equity.
B)always decreases the risk of the common equity.
C)could either increase or decrease the risk of the common equity.
D)does not affect the risk of common equity.

Question

Quizplus · Accepted Answer

The risk of common equity could increase or decrease with a bond-warrant package, depending on the specifics of the package. The bond portion may provide a stable income stream, reducing risk, while the warrant portion may increase the volatility of the equity if exercised. Therefore, it is not a definitive answer that it always increases or decreases the risk of common equity.

A Bond-Warrant Package