Common stockholders expect greater returns than bondholders because
A) they have no legal right to receive dividends.
B) they bear greater risk.
C) in the event of liquidation, they are only entitled to receive any cash that is left after all creditors are paid.
D) all of the above.

Question

Quizplus · Accepted Answer

All of the options provided are correct reasons why common stockholders expect greater returns than bondholders. A) Common stockholders have no legal right to dividends, which are paid at the discretion of the company's board of directors. B) They bear greater risk because their investment's value is more volatile and can decrease to zero. C) In the event of liquidation, common stockholders are last in line to be paid, only receiving any remaining assets after all creditors, including bondholders, are paid.

Common Stockholders Expect Greater Returns Than Bondholders Because