Civil Services Examination · Question 37

Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders. Statement II: Bondholders are lenders to a company whereas stockholders are its owners. Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company. Which one of the following is correct in respect of the above statements?

1. ABoth Statement II and Statement III are correct and both of them explain Statement I
2. BBoth Statement I and Statement II are correct and Statement I explains Statement II
3. COnly one of the Statements II and III is correct and that explains Statement I
4. DNeither Statement II nor Statement III is correct