Which of the following statements is CORRECT?
A) One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than are partners.
B) Relative to sole proprietorships, corporations generally face fewer regulations, and they also find it easier to raise capital.
C) There is no good reason to expect a firm's stockholders and bondholders to react differently to the types of assets in which it invests.
D) Stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns.
E) Bondholders should generally be happier than stockholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns.

Question

Quizplus · Accepted Answer

Stockholders typically prefer riskier projects with high potential returns because they stand to gain more if the projects succeed, whereas bondholders prefer safer projects to ensure they receive their fixed interest payments.

Which of the Following Statements Is CORRECT