pyq/2025/prelims/7

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