Question

Which of the following statements is most correct?

a) Group of answer choices Money market transactions include common stock transactions.
b) Preferred stockholders are paid before bondholders but after common stockholders.
c) One of the problems in corporations is that managers often put their own interests ahead of those of the stockholders.
d) U.S. T-bills are considered risky securities.
e) None of the above statements is correct.

Answer 1

Option (c) is the most correct, as it accurately describes the principal-agent problem in corporations where managers may prioritize their interests over those of stockholders. Other options are incorrect because money market transactions generally do not include common stock transactions, preferred stockholders are paid after bondholders, and U.S. T-bills are safe securities.

Step-by-step explanation:

The correct statement among the options provided is (c) One of the problems in corporations is that managers often put their own interests ahead of those of the stockholders. This issue is commonly referred to as the principal-agent problem or agency conflict and arises because managers may act in their self-interest rather than focusing on the wealth maximization of the shareholders.

Option (a) is incorrect because money market transactions typically involve short-term debt securities, not common stocks. Preferred stockholders (option b) are paid dividends before common stockholders but after bondholders are paid interest or due amount. Lastly, option (d) is also incorrect because U.S. T-bills are considered one of the safest securities.