Senior debentures usually provide lower interest rates than junior secured debt.
All things being equal, any secured debt is less risky than any unsecured debt, regardless of junior or senior status; therefore, debentures must pay a higher rate of interest.

Question

Quizplus · Accepted Answer

This statement is incorrect. Senior debentures are higher in the order of priority for repayment in case of default, so they are considered less risky than junior secured debt. Therefore, senior debentures can offer lower interest rates compared to junior secured debt.

Senior Debentures Usually Provide Lower Interest Rates Than Junior Secured