Compared to bondholders,stockholders
A)face higher risk and have the potential for higher returns.
B)face higher risk but receive a fixed payment.
C)face lower risk and have the potential for higher returns.
D)face lower risk but receive a fixed payment.

Question

Quizplus · Accepted Answer

Stockholders face higher risk than bondholders because their returns depend on the performance of the company and the stock market, which can be volatile. However, they also have the potential for higher returns if the company performs well and the stock price increases. Bondholders, on the other hand, receive a fixed payment and have lower risk because they are considered creditors and their returns are not dependent on the company's performance but rather its ability to pay back the loan.

Compared to Bondholders,stockholders