1. Will a rise in the debt to equity ratio of a company increase, decrease, or not affect the risk of its stock? Why? Explain.
2. Financing with convertible bonds is especially appropriate for small, rapidly growing, or risky companies. Explain why
3. Suppose that your company’s stock has been rising higher on a strong momentum. Will it be a rational decision for your firm to decide to issue stock to finance its projects? Why or why not? Explain carefully.