Consider the following statements: 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?

UPSC Prelims 2025 Question:

Consider the following statements:

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?

A. Both Statement II and Statement III are correct and both of them explain Statement I
B. Both Statement I and Statement II are correct and Statement I explains Statement II
C. Only one of the Statements II and III is correct and that explains Statement I
D. Neither Statement II nor Statement III is correct

Correct Answer: Option A

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