2. A company issues bonds claiming that the proceeds will be invested in a safe project. However, it uses the proceeds for a risky investment. Which of the following statements is true?

   1. The value of the debt will increase since the company is riskier.

   2. Issuing the bonds decreases the financial risk of the firm because bonds are less risky than equities.

   3. Switching to a risky investment compromises the debtholders' interests.

   4. Stockholders will be against the swtiching because their interests are compromised.

   5. None of the above.