If a corporation offers greater protection to a given class of bondholders, it must raise the interest rate on its bonds to make them more attractive to investors.

Name: If a corporation offers greater protection to a given class of bondholders, it must raise the interest rate on its bonds to make them more attractive to investors.
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Question

Quizplus · Accepted Answer

In keeping with risk/return, greater protection lowers risk, therefore investors cannot expect as great a return as if that protection were absent.

If a Corporation Offers Greater Protection to a Given Class