Compared to junior unsecured debt, subordinated debt exhibits __________ credit risk, __________ yield, and __________ recovery rate. A. lower / lower / higher B. higher / higher / lower C. higher / lower / lower D. lower / higher / lower

The answer is option B. higher/ higher/ lower Compared to junior unsecured debt, subordinated debt…

Compared to junior unsecured debt, subordinated debt exhibits __________ credit risk, __________ yield, and __________ recovery rate.

Compared to junior unsecured debt, subordinated debt exhibits credit risk, yield, and __ recovery rate.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 12DQ

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Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

Question

Compared to junior unsecured debt, subordinated debt exhibits __________ credit risk, __________ yield, and __________ recovery rate.

lower / lower / higher

higher / higher / lower

higher / lower / lower

lower / higher / lower

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