Common stockholders require a higher rate of return than do holders of Aaa-rated bonds. This reflects which type of risk premium?
A) maturity
B) default
C) seniority
D) marketability

Question

Quizplus · Accepted Answer

Common stockholders require a higher rate of return due to the seniority risk premium, as they are paid after bondholders in the event of liquidation, making their investment riskier.

Common Stockholders Require a Higher Rate of Return Than Do