Exercise
Answer the following questions.
1. Which of the following is not true about business development companies?
A. BDCs invest in small developing companies.
B. The securities inside a BDC can be issued by private companies.
C. BDCs can invest in only equity securities.
D. BDCs are not suitable for investors with a low risk tolerance.
2. Which kind of risk is a business development company least likely to face?
A. Liquidity risk
B. Purchasing power risk
C. Market risk
D. Default risk
3. Which of the following is true of business development companies?
A. They are typically closed-end funds that are exempt from the Investment Company Act.
B. They are a suitable investment for someone who needs capital preservation.
C. They tend to be high-risk investments that offer higher returns.
D. They are not allowed to invest in privately held companies.
Answers
1. C. BDCs may invest in either equity or debt securities.
2. B. BDCs can offer higher returns than other inves