Equity contracts
A)are claims to a share in the profits and assets of a business.
B)have the advantage over debt contracts of a lower costly state verification.
C)are used much more frequently to raise capital than are debt contracts.
D)are not subject to the moral hazard problem.

Question

Quizplus · Accepted Answer

Equity contracts represent ownership in a company and give investors a claim to a share in profits and assets. Debt contracts, on the other hand, represent a loan and have a fixed repayment schedule. Equity contracts are often riskier than debt contracts but have the potential for higher returns.

Equity Contracts