Question

Stockholders have residual claim on all assets after debt is paid and therefore have ____ risk than bondholders.

a) equal
b) higher
c) lower

Answer 1

b) higher

Step-by-step explanation:

As we know that the bondholders would be have more priority as compared with the shareholders either they have high risk as compared with the bond holders

So as per the given situation, in the case when the stockholder has the residual claim on all the assets after the payment of debt. This leads to high risk as compared with the bondholders

Therefore the correct option is B.