Which of the following statements about the characteristics of debt and equities is TRUE?
A)They can both be long-term financial instruments.
B)Bond holders are residual claimants.
C)The income from bonds is typically more variable than that from equities.
D)Bonds pay dividends.

Question

Quizplus · Accepted Answer

Debt and equities can both be long-term financial instruments, meaning they can have a maturity of several years or more. Option B is incorrect because bondholders are not residual claimants - they have priority over equity holders in terms of receiving payment. Option C is incorrect because the income from equities is typically more variable than that from bonds. Option D is incorrect because bonds do not pay dividends - they pay interest.

Which of the Following Statements About the Characteristics of Debt