Rank in ascending order (lowest to highest) the relative risk associated with holding the preferred stock, common stock, and bonds of a firm.
A) preferred stock, bonds, common stock
B) bonds, common stock, preferred stock
C) common stock, preferred stock, bonds
D) bonds, preferred stock, common stock

Question

Quizplus · Accepted Answer

Bonds typically have the lowest risk because they are debt instruments and have priority over stocks in case of liquidation. Preferred stock comes next as it often has fixed dividends and priority over common stock in dividends and liquidation. Common stock carries the highest risk as it has the last claim on assets and income.

Rank in Ascending Order (Lowest to Highest) the Relative Risk