Which of the following about the conflicts of interest between bondholders and stockholders is NOT correct?
Select one:
Oa. Because bankruptcy requires that corporate bondholders be paid in full before stockholders receive anything,
bondholders generally prefer to see corporate managers invest in high risk/high return projects rather than low risk/low
return projects.
Ob. it is more in bondholders' interests than stockholders' interests for a company to shift to safe, stable investments from
risky investments.
Oc. Stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential
returns as opposed to safe projects with lower expected returns, because stock has limited downside and unlimited
upside.
Od. The conflicts of interest between stockholders and bondholders is more costly to R&D intensive companies because
bondholders will try to limit such risky investments.
