Which of the following statements concerning bonds and risk is true?

Question

Quizplus · Accepted Answer

Bonds are generally less risky than common stock because bondholders have priority over stockholders in the event of bankruptcy and liquidation. However, default risk still exists, as there is a possibility that the issuer may fail to repay the bondholders. B-rated bonds are considered a higher risk than average, making D incorrect. A is incorrect as there are other risks associated with bonds beyond default risk, such as interest rate and inflation risk. B is incorrect as zero coupon bonds can actually have less risk than high coupon rate bonds, as they have a fixed payout and no reinvestment risk.

Which of the Following Statements Concerning Bonds and Risk Is