Rank in ascending order (lowest to highest) investors' required rates of return on the various types of corporate securities.

Question

Quizplus · Accepted Answer

Generally, investors require a higher rate of return for common stock than for preferred stock or corporate debt due to the higher level of risk involved. Preferred stock usually has a lower required rate of return than common stock but higher than corporate debt. Corporate debt is considered the least risky of the three securities and therefore has the lowest required rate of return for investors. Thus, the correct order in ascending order (lowest to highest) is corporate debt, preferred stock, common stock, which is represented in option D.

Rank in Ascending Order (Lowest to Highest) Investors' Required Rates