"Subordinated" debt is one form of __________ debt.

Question

Quizplus · Accepted Answer

Subordinated debt is a type of mezzanine debt, which means it is a form of financing that falls between senior debt and equity in terms of risk and reward. Mezzanine debt typically involves higher interest rates, fewer covenants, and more flexibility than traditional senior debt, but is subordinate to senior debt in the event of default. Therefore, Choice A (mezzanine) is the best choice in this context. Choice B (uncollateralized) is not necessarily accurate because subordinated debt can technically be either secured or unsecured. Choice C (zero-coupon) is not directly relevant to the nature of subordinated debt. Choice D (risk-free) is inaccurate because subordinated debt, being lower in the capital structure, carries more risk than senior debt.

"Subordinated" Debt Is One Form of __________ Debt