The yield on subordinated bonds as compared to non-subordinated bonds is considered as _________?
Correct answer: A. highly risky and higher yields
- A. highly risky and higher yields
- B. highly risky and lower yields
- C. less risky and higher yields
- D. less risky and lower yields
Explanation
Subordinated bondholders are paid after senior or non-subordinated bondholders if the issuer defaults, so subordinated bonds carry greater risk. Investors therefore demand higher yields as compensation.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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