Q37.
Consider the following statements: Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders. Statement II: Bondholders are lenders to a company whereas stockholders are its owners. Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company. Which one of the following is correct in respect of the above statements?
Answer
A
Explanation
I is correct: Bondholders have fixed interest and are paid before shareholders, making investments less risky. II is correct: Bondholders lend money to the (debt), while stockholders own equity (a share ownership). III is correct: For repayment purpose, are prioritized over stockholders by a In liquidation or bankruptcy, bondholders are before shareholders. both II and III are correct, and both explain why are at lower risk (Statement I), the correct is: Both Statement II and Statement III are correct and of them explain Statement I