Which one of the following statements is true?
A) Equity securities offer fixed claims on future cash payouts.
B) Unlike bondholders, for their returns, shareholders rely entirely on price appreciation.
C) In theory, common shareholders exercise very little control over company decisions.
D) Historically, common shareholders have earned a risk premium as compensation for risk borne in excess of government bonds.
E) Preferred shareholders are the first investors to be repaid in bankruptcy liquidation.
F) None of the above.

Question

Quizplus · Accepted Answer

Historically, common shareholders have earned a risk premium as compensation for risk borne in excess of government bonds. Equity securities do not offer fixed claims on future cash payouts, and equity returns can come from both price appreciation and dividends. Common shareholders have the right to elect the board of directors and to vote on major decisions affecting the company. Preferred shareholders have priority over common shareholders in bankruptcy liquidation. Therefore, statement D is the only true statement.

Which One of the Following Statements Is True