Which of the following statements is correct?

Question

Quizplus · Accepted Answer

A company's bond rating is determined by credit rating agencies and is based on a variety of factors including the company's financial ratios, provisions in its indenture, and other factors like industry trends and market conditions. Secured debt is generally considered less risky than unsecured debt because secured debt is backed by collateral, while unsecured debt is not. The expected return on a corporate bond must be equal to its promised return if the probability of default is zero, but if the probability of default is greater than zero, the expected return will be higher than the promised return to compensate for the additional risk. Senior debt is typically considered less risky than subordinated debt because senior debt holders have priority in the event of default.

Which of the Following Statements Is Correct