Stockholders normally obtain higher expected payments than bondholders because

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Stockholders face higher risk than bondholders and therefore require a higher expected payment to compensate for that risk. Bondholders have a higher priority of payment in the event of bankruptcy or default, while stockholders are only paid after all other obligations are met. Additionally, stockholders have the potential for higher returns through the appreciation of the stock price, but this also comes with the risk of the stock price decreasing.

Stockholders Normally Obtain Higher Expected Payments Than Bondholders Because