Which of the following statements is CORRECT?
A) Senior debt is debt that has been more recently issued,and in bankruptcy it is paid off after junior debt because the junior debt was issued first.
B) A company's subordinated debt has less default risk than its senior debt.
C) Convertible bonds generally have lower coupon rates than non-convertible bonds of similar default risk because they offer the possibility of capital gains.
D) Junk bonds typically provide a lower yield to maturity than investment-grade bonds.
E) A debenture is a secured bond that is backed by some or all of the firm's fixed assets.

Question

Quizplus · Accepted Answer

Convertible bonds offer the possibility of capital gains through the option to convert to common stock, so they generally have lower coupon rates than non-convertible bonds of similar default risk.

Which of the Following Statements Is CORRECT