Consider the following statements:

1. Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.

2. Statement II : Bondholders are lenders to a company whereas stockholders are its owners.

3. Statement III : For repayment purpose, bond-holders 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:

1. Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.

2. Statement II : Bondholders are lenders to a company whereas stockholders are its owners.

3. Statement III : For repayment purpose, bond-holders are prioritized over stockholders by a company.

Which one of the following is correct in respect of the above statements?

Accepted Answer

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

Answer

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

Answer

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

Answer

Neither Statement II nor Statement III is correct

Explanation

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