If a company defaults on its bonds,
A) subordinated debt is redeemed before senior debt
B) equipment trust certificates have an inferior position to income bonds
C) interest continues to accrue but may not be paid
D) debentures have a superior position to other bonds

Question

If a company defaults on its bonds,​
A) ​subordinated debt is redeemed before senior debt
B) ​equipment trust certificates have an inferior position to income bonds
C) ​interest continues to accrue but may not be paid
D) ​debentures have a superior position to other bonds

Quizplus · Accepted Answer

If a company defaults on its bonds, interest will continue to accrue but may not be paid. This is because interest payments on bonds are contractual obligations and failure to pay can result in default. However, the priority of redemption will depend on the terms and conditions of each bond issue, so it cannot be assumed that any particular type of bond will have a superior or inferior position in all cases.

If a Company Defaults on Its Bonds,​

If a Company Defaults on Its Bonds,