Suppose that the value of a bond is initially $10,000 at the beginning of the year and inflation is 5% over the course of 1 year. What did inflation do to the real value of the debt (liability) after 1 year for the debtor and the real value of the bond (asset) for the bondholder (creditor)

Which of the following statements is correct? stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns. potential conflicts between stockholders and bondholders are increased if a firm's bonds are convertible into its common stock. takeovers are most likely to be attempted if the target firm’s stock price is above its intrinsic value. one advantage of operating a business as a corporation is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in a partnership.