3. Debt is a more risky than equity because a debtholder's claim has priority to an...

Question

Question

3. Debt is a more risky than equity because a debtholders claim has priority to an equity holders cla a. True (b. False

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Debt is always less risky, comparatively, than the stock but Debt usually gives less return than the stock because debt are not traded at high levels and comparatively less volatile. Stock moves up and down very rapidly while as history suggests Debt stays put usually.

So Debt is Less risky.

So the statement is FALSE.

NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.

Add a comment

Answer 2

Similar Homework Help Questions

Which of the following statements is true? Equity is more costly to raise than debt because...

Which of the following statements is true? Equity is more costly to raise than debt because IPOs take a long time to organize Debt is more costly to raise than equity because it is riskier, thereby requiring higher returns Equity is more costly to raise than debt because it is riskier, thereby requiring higher returns Debt is more costly to raise than equity because the bond market is illiquid What is the goal of the Firm? To maximize shareholder value...
Debt financing is considered riskier than equity financing because of its required payments of interest and...

Debt financing is considered riskier than equity financing because of its required payments of interest and principal. True or False
Investing in a company’s common stock is more risky than in the same company’s bond because...

Investing in a company’s common stock is more risky than in the same company’s bond because _____________. the stock has voting rights. the bond can be called back. the stock has a higher par value than the bond. the bond’s future cash flows are more certain than the stock’s.

is this right. because oxygen is more priority than N. C(AN,N) (O,4W CN ONS it is...

is this right. because oxygen is more priority than N. C(AN,N) (O,4W CN ONS it is because His
A home equity loan can be risky because the lender can foreclose if you don’t make your payment.

A home equity loan can be risky because the lender can foreclose if you don’t make your payment.TRUE or FALSE.
Which of the following statements is true of the debt to equity ratio? A. The higher the debt to equity ratio, the gre...

Which of the following statements is true of the debt to equity ratio? A. The higher the debt to equity ratio, the greater the company's financial risk. B. If the debt to equity ratio is less than 1, the company is financing more assets with debt than with equity. C. If the debt to equity ratio is greater than 1, the company is financing more assets with equity than with debt. D. The higher the debt to equity ratio, the...

true and false . The cost of equity is expected to be higher than the after-tax...

true and false . The cost of equity is expected to be higher than the after-tax cost of debt. Therefore, increasing the debt ratio will always lower the cost of capital. Firms with more uncertainty about future investment needs (both in terms of magnitude and type) should generally borrow more money than firms with less uncertainty Debt is cheaper source of financing than Equity. Explain the potential reasons this may be true or false
T or F 17. STOCKS GENERALLY ARE MORE RISKY THAN BONDS. BONDS ARE DEBT INVESTMENTS. 18....

T or F 17. STOCKS GENERALLY ARE MORE RISKY THAN BONDS. BONDS ARE DEBT INVESTMENTS. 18. REAL INTEREST RATE < NOMINAL INTEREST RATE. 19. ACCOUNTING PROFIT= NET INCOME= REVENUES- EXPENSES – TAXES 20. ECONOMIC PROFIT= NET INCOME= REVENUES – EXPLICIT COSTS – IMPLICIT COSTS. 21. POSITIVE CASH FLOW = INFLOW < OUTFLOW. 22. FIRMS RAISE MONEY BY USE OF STOCKS, BONDS, AND DIVIDENDS. 23. OWNERS EQUITY= REVENUE – DIVIDENDS + EXPENSES – OWNERS PAID IN CAP. 24. RISKS ARE INDIRECTLY...
1. The after-tax cost of debt is higher than the before-tax cost of debt. True or...

1. The after-tax cost of debt is higher than the before-tax cost of debt. True or False 2. The constant dividend growth model and CAPM are two ways of estimating a firm's cost of equity. True or False 3. The cost of capital uses the amounts of total assets and debt as the capital structure weights. True or False 4. In deriving the WACC, market values are preferred over book values for the capital structure weights. True or False 5....

Why is scientific knowledge more reliable than other types of knowledge? A. Because scientists are more...

Why is scientific knowledge more reliable than other types of knowledge? A. Because scientists are more reliable than other people. B. Because false hypotheses are discarded, and results are peer reviewed by other experts to ensure accuracy. C. Science is not more reliable. D. Because science only uses facts that are proven 100% true through the use of variables.

3. Debt is a more risky than equity because a debtholder's claim has priority to an...

Homework Answers

Add Answer to:
3. Debt is a more risky than equity because a debtholder's claim has priority to an...

Post as a guest

Earn Coins

Which of the following statements is true? Equity is more costly to raise than debt because...

Debt financing is considered riskier than equity financing because of its required payments of interest and...

Investing in a company’s common stock is more risky than in the same company’s bond because...

is this right. because oxygen is more priority than N. C(AN,N) (O,4W CN ONS it is...

A home equity loan can be risky because the lender can foreclose if you don’t make your payment.

Which of the following statements is true of the debt to equity ratio? A. The higher the debt to equity ratio, the gre...

true and false . The cost of equity is expected to be higher than the after-tax...

T or F 17. STOCKS GENERALLY ARE MORE RISKY THAN BONDS. BONDS ARE DEBT INVESTMENTS. 18....

1. The after-tax cost of debt is higher than the before-tax cost of debt. True or...

Why is scientific knowledge more reliable than other types of knowledge? A. Because scientists are more...

3. Debt is a more risky than equity because a debtholder's claim has priority to an...

Homework Answers

Add Answer to: 3. Debt is a more risky than equity because a debtholder's claim has priority to an...

Post as a guest

Earn Coins

Add Answer to:
3. Debt is a more risky than equity because a debtholder's claim has priority to an...