Consider the effect of business cycles on bondholders versus stockholders.We expect that business cycles will affect:

Question

Quizplus · Accepted Answer

Stockholders are more affected by business cycles because they are residual claimants, meaning their returns depend on the company's profitability, which fluctuates with economic conditions. Bondholders receive fixed interest payments regardless of the company's performance.

Consider the Effect of Business Cycles on Bondholders Versus Stockholders