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?

Question

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?

Accepted Answer

A. Both Statement II and Statement III are correct and both of them explain Statement I

Answer

B. Both Statement I and Statement II are correct and Statement I explains Statement II

Answer

C. Only one of the Statements II and III is correct and that explains Statement I

Answer

D. Neither Statement II nor Statement III is correct

Linked Syllabus Concepts