Which of the following statements regarding corporate bonds is most correct? a.

Question

Which of the following statements regarding corporate bonds is most correct?

a. Debentures are riskier than subordinated debentures because they are paid last in the event of bankruptcy. b. Mortgage bonds are riskier than debentures because the value of the asset pledged as collateral may not be sufficient to repay the mortgage.

c. The interest rate on subordinated debentures is likely to be higher than the interest rate on debentures.

d. Debentures are secured by the asset purchased with the loaned funds.

e. None of the above statements is correct.

Explanation / Answer

c. The interest rate on subordinated debentures is likely to be higher than the interest rate on debentures.

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