Other things being equal,a firm will have to pay a higher coupon rate on its subordinated debentures than on its second mortgage bonds.

Name: Other things being equal,a firm will have to pay a higher coupon rate on its subordinated debentures than on its second mortgage bonds.
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Subordinated debentures are considered riskier than second mortgage bonds as they are junior in priority in case of default. Therefore, investors demand a higher coupon rate as compensation for taking on that additional risk.

Other Things Being Equal,a Firm Will Have to Pay a Higher